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Northwestern University School of Law 



NATIONAL REPORTER SYSTlîM— UNITED STATES SERIES 



THE 

FEDERAL REPORTER 

WITH KEY-NUMBER ANNOTATIONS 



VOLUME 250 



PERMANENT EDITION 



CASES ARGUED AND DETERMINED 
œ TBB 

CIRCUIT COURTS OF APPEALS AND 
DISTRICT COURTS OF THE 
UNITED STATES 



AUGUST — OCTOBER, 1918 



ST. PAUL 

WEST PUBLISHING CO. 

1918 



Coj'yRiGiiT, 1918 

BT 

WEST PUBLI|HING COMPANÏ 
(250 Fed.) 



FEDERAL REPORTER, VOLUME 250 



JUDGES 



UNITED STATES CIRCUIT COURTS OF APPEALS 
AND THE DISTRICT COURTS 



FIRST CIRCUIT 



Hon. OLIVER WENDELL HOLMES, Circuit Justice ■Washington, D. O. 

Hon. FREDERIC DODGE. Circuit Judge' Boston, Mass. 

Hon. GEO. H. BINGHAM, Circuit Judge Manchester, N. H. 

Hon. CHAS. F. .JOHNSON, Circuit Judge .Portland, Me. 

Hon. CLARENCE HALE, District Judge, Maine i.. Portland, Me. 

Hon. JAS. M. MORTON, Jr., District Judge, Massachusetts Boston, Mass. 

Hon. EDGAR ALDRICH, District Judge, New Hampshire Llttleton, N. H. 

Hon. ARTHUR U BROWN, District Judge, Rhode Island Providence, R. I. 



SECOND CIRCUIT 



Hon. LOUIS D. BRANDEIS, Circuit Justice Washington,' D. C. 

Hon. HENRY G. WARD, Circuit Judge ...New York, N. Y. 

Hon. HENRY WADB ROGERS, Circuit Judge New Haven, Conn. 

Hon. CHARLES M. HOUGH, Circuit Judge New York, -N. Y. 

Hon. MARTIN T. MANTON, Circuit Judge ..., New York, N. Y. 

Hon. BDWIN S. THOMAS, District Judge, Conneoticut New Haven, Conn. 

Hon. THOMAS I. CHATFIELD, District Judge, E. D. New York Brooklyn, N. Y. 

Hon. BDWIN LOUIS GARVIN, District Judge, B. D. New York Brooklyn, N. Y. 

Hon. GEORGE W. RAY, District Judge, N. D. New York Norwich, N. Y. 

Hon. LEARNED HAND, District Judge, S. D. New York New York, N. Y. 

Hon. JUHUS M. MAYER, District Judge, S. D. New York ..;......;...* fîîèw' Y6rk, N. Y. 

Hon. AUGUSTUS N. HAND, District Judge, S. D. New York... New York-, N. Y. 

Hon. JOHN CLARK KNOX, District Judge, S. D. New York NewYork, N. Y. 

Hon, JOHN R. HAZEL, District Judge, W. D. New York BuBalo, N. Y. 

Hon. HARLAND B. HOWE, District Judsa, Vermont St. Johusbury, Vt. 

THIRD CIRCUIT 

Hon. MAHLON PITNEY, Circuit Justice Washington, D. C. 

Hon. JOSEPH BUPFINGTON, Circuit Judge i Pittsburgh, Pa. 

Hon. JOHN B. McPHERSON, Circuit Judge Philadelpbla, Pa. 

Hon. VICTOR B. WOOLLEY, Circuit Judge ;........... Wllmlngton, Del. 

Hon. JOHN RELLSTAB, District Judge, New Jersey Trenton, N. J. 

Hon. THOS. G. HAIGHT, District Judge, New Jersey Jersey City, N. J. 

Hon. J. WARREN DAVIS, District Judge, New Jersey Trentun, N. J. 

Hon. J. WHITAKER THOMPSON, District Judge. E. D. Pennsylvania...Philadelphia. Pa. 

Hon. OLIVER B. DICKINSON, District Judge, B. D. Pennsylvania Philadelphla, Pa. 

Hon. CHAS. B. WITMBR, District Judge, M. D. Pennsylvania Sunbury, Pa. 

Hon. CHARLES P. ORR, District Judge, W. D. Pennsylvania .,... Pittsburgh, , Pa. 

Hon. Vf. H. SEWARD THOMSON, District Judge, W. D. Pennsylvania Pittsburgh, Pa. 

1 Eesigned July 1, 191«. 

(V) 



VI 250 FEDERAL REPORTEE 



FOURTH CIRCUIT 

Hon. EDWARD D. WHITE, Circuit Justice Washington, D. G. 

HoB. JETER C. PRITCHARD, Circuit Judge Ashevllle, N. C. 

Hon. MARTIN A. KNAFP, Circuit Judge Wasliington, D. G. 

Hon. CHAS. A. WOODS, Circuit Judge Marion, S. C. 

Hon. JOHN C. ROSE, District Judçe, Maryland... Baltimore, Md. 

Hon. HENRY G. CONNOR, Dlstrrct Judge, E. D. Nortli, Carollna Wilson, N. C. 

Hon. JAMES E. BOYD, District Judge, W. D. North Carolina Greensboro, N. C. 

Hon. HENRY A. MIDDLETON SMITH, District Judge, E. D. S. C Charleston, S. C. 

Hon. JOSEPH T. JOHNSON, District Judge, W. D. S. C Greenvllle, S. C. 

Hon. EDMUND WADDILL, Jr., District Judge, E. D. Virginia Richmond, Va. 

Hoû. HENftï CLAY l^IcDOWËLL, 'District' Judge, W. D. Virginia Lynchburg, Va. 

Hon. ALSTON G. DAYtON, District Judge, N. D. West Virginia Pliilippl, W. Va. 

Hon. BENJAMIN P. KBLLBR, District Judge, S. D. West Virginia. ...Charleston. W. Va. 



FIFTH CIRCUIT 



Hon. JAMES CLARK McREYNOLDS, Clrcalt Justice Washington, D. C. 

Hon. DON A. PARDEE, Circuit Judge Atlanta, Ga. 

Hon. RICHARD W. WALKER, Circuit Judge Huntsville, Ala. 

Hon. ROBERT LYNN BAtfS, Circuit Judge Austin, Tex. 

Hon. HENRY D'. CLAVTON, Dlslirict Judgë, N. and M. D. Alabama...,Montgomery, Ala. 

Hon. WM. I. GSUBB, District Judge, I>f. D. Alabama Birmingham, Ala. 

Hon. ROBERT T. ÉRVIN, District Judge, S. D. Alabama Mobile, Ala. 

Hon. WM. b: SHEPPARD, District Judge, N. D. Florida .Pensacola, Fia. 

Hon. EHYDON M. CALL, District Judge, S. D. Florida Jacksonville, Fia. 

Hon. WlLLIAlil T. NEWMAN, District Judge, N. D. Georgia Atlanta, Ga. 

riori. EMORY SPÉÊR, District Judge, S. D. Georgia Maçon, Ga. 

Hou. BEVERLY D. EVANS, District Judge, S. D. Georgia Savannah, Ga. 

Hon. RUFUS E. FOSTER, District Judge, B. D. Louisiana New Orléans, La. 

Hon. GEORGE W. JACK, District Judge, W. D. Louisiana Shreveport, La. 

Hon. HENRY C. NILES, District Judge, N. and S. D. Mississippi Kosciuako, Miss. 

Hon. GORDON RUSSELL, District Judge, B. D. Texas Sherman, Tex. 

Hon. EDWARD R, MBEK, Dl?tr(çt Jutjge, N. D. Teixas Dallas, Tex. 

Hon. DUVAL WEST, DUtrlct Judge, W. D. Texas San Antonio, Tex. 

Hon. JOSEPH C. HVTCHES.ON. Ji-j. District Judge, S. D. Texas Houston, Tex. 

Hon. W. R. SMITH. District. Judge, W. D. Texas El Paso, Tex. 

SIXTH CIRCUIT 

Hon. WILLLAM E. DAT, Circuit Justice... Washington, D. C. 

Hon. JOHN W. WÀRRINGTON, Circuit Judge Cincinnati, Ohio. 

Hon. LOYAL E. KNAPPBN, Circuit Judge Grand Rapids, Mlch. 

Hon. ARTHUR C. DENÏSON, Circuit Judge Grand Haplds, Mlch. 

Hon. ANDREW M. J. COCHRAN, District Judge, B. D. Kentucky MaysvlUe, Ky. 

Hon. WALTER ÉVANS, District Judge, W. D. Kentucky Loulsville, Ky. 

Hon. ARTHUR J. TUTTLE, District Judge, E. D. Michigan Détroit, Mlch. 

Hon. CLARENCB W. SESSIOlfJS, District Juijge, W. D. Michigan Grand Rapids, Mich. 

Hon. JOHN M. KILLITS, Dlsti-lct Judge, N. D. OMo..: Toledo, Ohio. 

Hon. D. C. WESTENHAVER, District Judge, N. D. Ohio Cleveland, Ohio. 

Hon. JOHN W. SATER, District Judge, ?. D. Ohip. Coluinbus, Ohlo. 

Hon. HOWARD C. HOLLISTER,. P'stric* Judge, S. D. Ohlo Cluclnnati, Ohio. 

Hon. EDWARD T, SANFQRD, District Judge, B, and M. D. Tennessee.. Knoxvilie, Tenn. 
HoB. JOHN B. MpCA.LLi PiBtrlct Judge, W. P. Tennessee Mempbis,TeQii. 



SEVENTH CIRCUIT 



Hon. JOHN H. CLARKE, Circuit Justice Washington, D. C, 

Hon. FRANCia E. BAKER, Circuit Judge Goshen, Ind. 

Hon. JULIAN- W-. MACK, Circuit Judge ..Chicago, IIU 

Hon. SAMUEL A1.SCHULBR; Circuit Judge Chicago, IlL 

Hon. EVAN A. EVANS, Circuit Judge Baraboo, Wisj 

Hon. KENESAW M. LANDIS, District Judge, N. D. Illinois,. Chicago, 111. 

Hon. GEORGE A. CARPENTBR, District Judge, N. D. Illinois Chicago, 111. 



JUDGES OF THE COURTS VU 

Hon. J. OTIS HUMPHRET, District Judge, S. D. Illinois» Sprlngfleld, 111. 

Hon. LOUIS PITZHENRY, District Judge, S. D. Illinols= Bloomington, II!. 

Hon. GEO. W. ENGLISH, District Judge, E. D. Illinois Danville, 111. 

Hon. ALBERT B. ANDERSON, District Judge, Indiana Indianapolis, Ind. 

Hon. FERDINAND A. GEIGER, District Judge, E. D. Wlsconsin Milwaukee, Wis. 

Hon. ARTHUR L. SANBORN, District Judge, W. D. Wisconsln Madison, Wis. 

EIGHTH CIRCUIT 

Hon. WILLIS VAN DEVANTBR, Circuit Justice Washington, D. C. 

Hon. WALTER H. SANBORN, Circuit Judge St. Paul, Mina 

Hon. WILLIAM C. HOOK, Circuit Judge Leaven-worth, Kan. 

Hon. WALTER I. SMITH, Circuit Judge Council Bluffs, lowa. 

Hon. JOHN E. CARLAND, Circuit Judge Washington, D, C. 

Hon. KIMBROUGH STONB, Circuit Judge Kansas City, Mo. 

Hon. JACOB TRIBBER, District Judge, E. D. Arkansas Little Rock, Ark. 

Hon. P. A. YOUMANS, District Judge, W. D. Arkansas Ft. Smith, Ark. 

Hon. ROBERT E. LEWIS, District Judge, Colorado Denver, Colo. 

Hon. HENRY T. REED. District Judge, N. D. lowa Cresco, lowa. 

Hon. MARTIN J. WADE, District Judge, S. D. lowa lowa City, lowa. 

Hon. JOHN C. POLLOCK, District Judge, Kansas Kansas City, Kan. 

Hon. PAGE MORRIS, District Judge, Minnesota Duluth, Minn. 

Hon. WILBUR F. BOOTH, District Judge, Minnesota Mlnneapolls, Mlnn. 

Hon. DAVID P. DYER, District Judge, B. D. Missouri St. Louis, Mo. 

Hon. ARBA S. VAN VALKENBURGH, District Judge, W. D. Missouri. . .Kansas City, Mo. 

Hon. THOMAS C. MUNGBR, District Judge, Nebraska Lincoln, Neb. 

Hon. JOSEPH W. WOODROUGH, District Judge, Nebraska Omaha, Neb. 

Hon. COLIN NEBLETT, District Judge, New Mexico Santa Fé, N. M. 

Hon. CHARLES F. AMIDON, District Judge, North Dakota Fargo, N. D. 

Hon. RALPH E. CAMPBELL, District Judge, B. D. Oklahoma» Muskogee, Okl. 

Hon. JOHN H. COTTERAL, District Judge, W. D. Oklahoma Guthrie, Okl. 

Hon. JAMES D. ELLIOTT, District Judge, South Dakota Sloux Falls, S. D. 

Hon. TILLMAN D. JOHNSON, District Judge, Utah Ogden, Utah. 

Hon. JOHN A. RINER. District Judge, Wyomlng Cheyenne, Wyo. 

NINTH CIRCUIT 

Hon. JOSEPH McKENNA, Circuit Justice Washington, D. 0. 

Hon. WILLIAM B. GILBERT, Circuit Judge Portland, Or. 

Hon. ERSKINB M. ROSS, Circuit Judge ...Los Angeles, CaL 

Hon. WM. W. MORROW, Circuit Judge San Francisco, Cal. 

Hon. WM. H. HUNT, Circuit Judge Washington, D. C. 

Hon. WM. H. SAWTELLE, District Judge, Arizona Tucson. Àrlz. 

Hon. BENJ. P. BLEDSOE, District Judge, S. D. Callfornla Los Angeles, Cal. 

Hon. OSCAR A. TRIPPBT, District Judge, S. D. Callfornla Los Angeles, Cal. 

Hon. WM. C. VAN FLEET, District Judge, N. D. Callfornla San Francisco, Cal. 

Hon. MAURICE T. DOOLING, District Judge, N. D. Callfornla San Francisco, Cal. 

Hon. FRANK S. DIETRICH, District Judge, Idaho Boise, Idaho'. 

Hon. GEO. M. BOURQUIN, District Judge, Montana Butte, Mont 

Hon. EDWARD S. FARRINGTON, District Judge, Nevada Carson City, Nev. 

Hon. CHARLES E. WOLVERTON, District Judge, Oregon Portland, Or." 

Hon. ROBERT S. BEAN, District Judge, Oregon Portland' Or 

Hon. FRANK H. RUDKIN, District Judge, B. D. Washington Spokane, Wash." 

Hon. EDWARD B. CUSHMAN, District Judge, W. D. Washington Seattle Wash 

Hon. JEREMIAH NETERER, District Judge, W. D. Washington Seattle, Wash, 

' Dled June 14, 1918. « Reslgned August 31. 1918. 

• Appolnted July 6, 1918, to succeed J. Otis Humphrey. 



CASES REPORTED 



Ada, The (O. C. A.) 194 

^tna làfo Ins. Cc]., ^'()o^ho<>s v. (L). C.)-. 48-1 
Akti<'Solskaliet Korn-Ofi; Koderstof Kom- 

pagciot V. Rederiaktiel)ola!;('t Atlanten 

(C. C. A.) 035 

AktieselsUabet .Stavangeren v. Hiiiibard-Ze- 

murray S. S. Co. (C. C. A.) 67 

Alaska Mines (^'orporation. Aniprican Man- 
ganèse Steel Co. V. (C. C. A.) G14 

Ail V. Ail (D. C.) 120 

Almora. The (C. C. A.) 1018 

American Bottle Cap Co., Manton-Gaulin 

Mts. Co. 1'. (D. C.) 865 

Amei'iean Diistributing Co. v. Hayes Wheel 

Co. (D. C.) 109 

American KeylesB Kap Corporation v. 

United States Métal Cap & Seal Co. (C. 

C. A.) 857 

American Keyless Kap Corporation v. Unit- 
ed States Métal Cap & Seal Co. (D. C.)1024 
American Manganèse Steel Co. v. Alaska 

Mines Corporation (C. C. A.) 614 

American Métal Co., Kicand v. (C. C. A.) 853 
American Sugar Refining Co., Bonvillain v. 

(D. C.) 641 

American Sugar Refining Co., Oaillouet v. 

(D. C.) 639 

Arnson, Stromberg Motor Devices Co. v. 

(C. C. A.) 1023 

Artcraft Pictures Corporation, Triangle 

Film Corporation v. (C. C. A.) 981 

Ash Sheep Co. v. United States (C. C. A.) 591 
Ash Sheep Co., United States v. (C. C. A.) 592 
Atlanta & W. P. R. Co., Western Union 

Tel. Co. V. (C. C. A.) 208 

Atlantic Coast Ldne R. Co., Sanchez v. (D. 

C.) 638 

Atlas Portland Cément Co., Harrell v. (0. 

C. A.) 83 

Augusta-Savannah Nav.-Co., Chicago Bond- 

ing & Surety (îo. v. (O. C A.) 616 

Auto Vaeuum Freezer Co. v. William A. 

Sexton Co. (D. C.) 459 

Babcock Lumber & Land Co., Ferguson v. 

(C. O. A.) 1020 

Babvlon R. Co., .Spencer v. (C. C. A.) 24 

Ballard, Fédéral Coal Co. v. (C. C. A.)...2.S3 
Baltimore & O. R. Co. v. Lea (C. C. A.) . .1018 
Bankston v. Commercial Trust & Savings 

Bank (C. C. A.) 985 

Barbalatt v. United States (C. C. A.) 1018 

Barge No. 12, The (T). C.) 923 

Barge 123, The (D. C.) 476 

Barnett Nat. Bank of Jacksonville, Reed 

V. (C. O. A.) 983 

Bâtes, Bunker v. (C. C. A.) 525 

Bâtes, Dresser v. (C. C. A.) 525 

Bâtes, Gale v. (C. O. A.) 525 

Baur, Govild Mines Co. v. (C. C. A.) 770 

Baxter & Co., In re (D. C.) 307 



Pape 

Béatrice Bush, The (C. C. A.) 855 

Beaven v. Stuart (C. C. A.) ; 972 

Belgium, The (D. C.) 259 

Bell, Ilarris v. (G. C. A.) 209 

Beneby, Pacific Mail S. S. Co. v. (C. C. A.) 444 

Bettman-Johnson Co., In re (C. C. A.) 657 

P.ishop's Estate, In re (C. C. A.) 145 

lijornquist v. Boston & A. R. Co. (C. C. 

A.) 929 

Blackraan v. United States (C. C. A.) 449 

Board of Public Education of City of Phil- 

adelphia, Gillin v. (D. C.) 649 

Boitano v. District Board, Northern Dist. 

No. 3. Sacramento. Cal. (D. C.) 812 

P.olton Castlo. The (C. O. A.) 403 

ISonner McCraw Co., In re (D. C.) 318 

Bonvillain v. American Sugar Refining Co. 

(D. C.) 641 

Borden's Condensed Milk Co. v. Mosbv (C. 

C. A.) . • ^ 



..) - 

Boston Elevated R. Co., Chesbrough y. (D. 

C.) 

Boston & A. R, Co., Bjomquist v. (C. C. 

A.) 

Brainerd. United States v. (D. C.) 

Bronx, The (C. C. A.) 

Brooklyn Eastern Dist. Terminal, Liver- 

pool, Brnzil & River Plate Steam Nav. 

Co. V. (C. C. A.) 

Brown v. Pennsvlvania R. Co, (C. C. A). . 
Browning v. Mdelity Trust Co. (C. 0. A.) 
Buckeye Cotton Oil Co. v. Sloan (C. C. A.) 

Bud III, The (D. C.) 

Bunker y. Bâtes (C. C. A.) 

Bush. The Béatrice fC. C. A.) 

Butte & Superior IMining Co. v. Minerais 

Séparation (C. C. A.) 



839 

922 

929 

1011 

843 



1021 
513 
321 

712 
918 
525 
855 

241 



Oaballero v. Oriado, Succession of (C. C. 

^A.) 345 

Caillouet v. American Sugar Refining Co. 

(D. C.) 639 

Calder & Richmond v. E. W. Rosenthal & 

Co. (D. C.) 507 

Californie, The (C. C. A.) 790 

Cambron, Tripplehorn v. (C. C. A.) 605 

Cameron v. United States (C. C. A.) 943 

Camors, Sehall v.. two cases (C. C. A.). . . . 6 

Oarfloat No. 18, The (D. C.) 867 

OarpenteP, New York Trust Co. v. (C. C. 

A.) 668 

Carson v. Hurt (C. C. A.) ,30 

Carter. United States v. (D. C.) 299 

C. F. Harms Co. v. Cornell Steamboat Co. 

(C. C. A.) S45 

Chapman v. Mills & Gibb (C. C. A.) 1018 

Chapman v. Sims (C. C. A.) 991 

Chase Nat. Bank, United States v. (C. O. 

A.) 105 

Chesbrough v. Boston Elevated B. Co. 

(D. C.) 922 



250 F. 



(ix) 



250 FEDERAL REPORTER 



Page 
Chicago Bonding & Surety Co. v. Augus- 

ta-Savanjiah Nav. Co. (C. C. A.) 616 

Cliicago, B. & Q. R. Co., Oison v. (C. O. 

A.) 372 

Chicago, M. & St. P. R. Co., United States 

T. (O. C. A.) 442 

Cliicaeo & A. 11. Co., United States v. (0. 

G. A.) 101 

City of Berlin v. Devost (C. O. A.) 349 

City of Cleveland, Walsh Const. Co. v. (D. 

G.) 137 

City of Krie, The (D. C.) 259 

Clark, Kalehua v. (O. C. A.) 012 

Clark V. United States (C. O. A.) 449 

Cleveland & Buffalo Transit Co. v. Great 

Lakes S. S. Co. (D. C.) 259 

Clinton, The .Toseph F. (0. C. A.) 977 

Clum, Stellwagen v. (C. O. A.) 1022 

Cohen v. Goldman (C. C. A.) 599 

Cole V. Ed. G. Hookstratten Cigar Co. 

(C. C. A.) 629 

Commercial Trust & Savings Bank, Bank- 

ston V. (C. C. A.) 985 

Condamnation of Lands for Military Camp, 

In re (D. C.) 314 

Coney, The Edgar F. (D. C.) 271 

Conley, Consolidation Coastwise Co. v. (C. 

C. A.) 679 

Conn V. Drew (C. C. A.) 852 

Consolidated Fuel Co. v. St. Louis South- 

western R. Co. of Texas (0. C. A.) 395 

Consolidation Coastwise Co. v. Conley (C. 

C. A.) 679 

Cornell Oo., Shredded Wheat Co. v. (C. C. 

A.) 9«0 

Cornell Steamboat Co., C. F. Ilarms Co. v. 

(C. C. A.) 845 

Corn Exch. Bank, In re (D. C.) 504 

Cowin. Wylde v. (C. C. À.) 403 

Cramer v. United States (C. C. A.) 1019 

Crawford, In re (O. C. A.) 41 

Criado, Succession of, Caballero v. (C. C. 

A.) 345 

Crisfield, The (D. 0.) 867 

Crocker v. Malley (C. C. A.) 817 

Cross V. Georgia Iron & Coal Cb. (O. C. 

A.) 438 

Curtis, The Mary B. (C. O. A.)..., 9 

Daeche v. United States (C. C. A.).. 566 

Dana Bros., In re (D. C.) 268 

Parrow. Postal Telegraph-Cable Co. v. (O. 

C. A.) 581 

David V. Yonngken (C. C. A.) 208 

De.ionge & Co., Oriental Tissue Co; v. (O. 

C. A.) 627 

Delaware, L. & W. E. Co. v. Petrowsky 

(C. C. A.) 554 

De Moss V. United States (C. O. A.) 87 

Denny v. Giles (C. C. A.) 987 

Denver .Se R. G. R. Co., Equitable Trust 

Co. of New York v. (C. O. A.) 327 

Détroit Showcase Co. v. Kawneer Mfg. 

Co. (O. C. A.) 234 

Devost, City of Berlin v. (C. O. A.) .... . 349 
Devost V. Twin State Gas & Electric Go. 

(C. C. A.) 349 

Diamond Iron Works, Filer & Stowell Co. 

V. (C. C. A.) 454 

District Board, Northern Dist. No. 3, Sac- 

ramento, Cal., Boitano v. (D. C.) 812 



Page 
Dixon V. George W. Ilowe & Co. (C. C. A.) 11) 
Dooley v. i'enusvlvania R. Co. (1). ('.)... 142 

Dorset, The (D. C.) 8(i7 

Dou£;an, l'irst Nat. Baiik of Spartanbur^ï, 

S. C, v. (O. C.) 510 

Downs, Erie R. Co. v. (C. C. A.) 415 

Dredge, Two Barges and the Bud III, 

In re (D. C.) 319 

Dresser v. Bâtes (C. C A.) 5:iu 

Drew, Conn v. (O. C. A.) 852 

Dunn, Ex parte (D. C.) 871 

Du Pont, Gardiner v. (C. C. A.) 227 

Du Font do Nemours & Co., Lauria v. (C. 

C. A.) 353 

Eclipse Poultry Co., In re (C. C. A.) 96 

Eddystone Ammunition Corporation, Kaye 

V. (D. C.) 654 

Edgar F. Coney, The (D. C.) 271 

Ed. G. Hookstratten Cigar Co., Cole v. (C. 

C. A.)... 629 

Edward V. Hartford, Inc., Lyon Non-Skid 

Co. V. (C. 0. A.) 1021 

E. I. Du Pont de Nemours & Co., Lauria v. 

(0:C. A.) 353 

Electric Boat Co. v. Lake Torpédo Boat 

Co., two cases (C. C. A.) 1019 

Ellen M. Ronan. The (C. C. A.) 797 

Ellis, The (C. C. A.) 9 

Elwell & Co., United States v., two cases 

(C. C. A.) 939 

Elzey, The George W. (C. C. A.) 602 

Empire Mfg. Co., Fraad Talking Mach. 

Go. V. (C. C. A.) 618 

Equitable Trust Co. of New York v. Denver 

& R. G. R. Co. (O. C. A.) 327 

Equitable Trust Co. of New York v. West- 
ern Pae. R. Co. (C. C. A.) 327 

Erber v. United States (C. C. A.) 1019 

Erie Lighter 108, The (D. C.) . .' 490 

Erie B. Co. v. Downs (C. 0. A.) 415 

Brrett, Individual Drinking Cup Co. v. (C. 

C. A.) ; 620 

Essex S. S- Co. V. Langbehn (C. C. A.) 98 

E. W. Rosenthal & Co., Calder & Richmond 

V. (D. C.) 507 

Fnirhaven Water Co. v. Inmachuck Dredg- 

ing Co. (C. C. A.) 1020 

ITteatheredge Rubber Co. v. Miller Rubber 

Cb, (D. C.) 255 

Fédéral Coal Co. v. Ballard (0. C. A.) . . . 233 

Feick V. Stephens (C. C. A.) 185 

Feick, V, Stephens fC. C. A.) . . 191 

Perguson v. Babcock Lumber & Land Co. 

(C, 0. A.) 1020 

Fersko, Inc., In re (O. C. A.) . .357 

Fidelity Trust Oo., Browning v. (C. 0. A.) 321 
Fifth Nat. Bank of City of New York v. 

Lyttle (O. C. A.).. 361 

Filer & Stowell Co. v. Diamond Iron 

Works (C. C. A.) 454 

First Nat. Bank, United States v. (D. C.) 299 
First Nat. Bajik of Spartanburg, S. C, 

V. Dougaç (D. C.) 510 

Fischer v. fnited States (C. C. A.) 793 

FlemiPE V. Noble (C. C. A.) 7.33 

Pluckey, W.oo Shing v. (C. C. A.) 598 

Forbes, United States v. (D. C.) 299 

Fraad Talking Maeh. Co. v. Empire Mfg. 

Co. (C. O. A.) 618 



CASES REPORÏED 



XI 



Page 

Frederick v. Sllvorman (G. C. A.) 75 

Fre(i(i-ick Starr Coiitractiiig Go., Kennelly 

V. (G. G. A.l 229 

Freneh, lu re (D. G.) 044 

Galbraith v. Itosonstfiin (C. O. A.) 445 

(iale V. lîatos (V. C. A.) 525 

Galen v. J'nited Stutps (G. C. A.) 947 

Giirdiner v. «u Pont (C. C. A.) 227 

Garrison v. Kiirt (G. C. A.) 1020 

Gee Woe v. United States (C. O. A.) 42S 

Gehrct Bros. v. Kutter (O. C. A.) 447 

General Inv. Go. v. Lake Shore & M. S. R. 

Oo. (G. G. A.) 160 

George v. Oscar Smith & Sons Go. (C. G. 

A.) 41 

George W. Elzey, Tlie (C. G. A.) 602 

George W. Howe & Go., Dixon v. (C. C. 

A.) 19 

Georgia Iron & Goal Co., Cross y. (C. C. 

A.) 438 

Georgia Steel Co., In re (O. G. A.) 438 

G. F. Harvey Go. v. United States (C. G. 

A.) 1020 

Giles, Denny v. (O. O. A.) 987 

Gillin V. Board of Public Education of 

Gitv of Pliiladelphia (I). G.) 649 

Globe Pàcking Box Go., In re (O. O. A.). . 7R4 

Goldman, Cohen v. (0. C. A.) 599 

Goldman, Sachs & Co., Pétition of (O. C. 

A.) 657 

Gordon, In re (D. G.) 798 

Gordon, In i-e (D. C.) 1023 

Gouçe V. Hart (D. G.) 802 

Gould Mines Go. v. Ba.uv (G. G. A.) 770 

Graboyes v. United States (G. C. A.) 793 

Grafï, In re (C. G. A.) 997 

Graff V. Rankin (C. C. A.1 150 

Graham & Irvine, T'nited States v. (D, C.) 499 

Gray & Davis, Light v. (D. O. 631 

Grav's Harbor Tugboat Go. v. Petêrsen 

(C. C. A.) 956 

Great Lakes Dredge & Dock Oo., In re 

(D. C.) 916 

Great T^kes S. S. Co., Cleveland & Buf- 

falo Transit Co. v. (D. C.) 259 

Greenberg, Lesariiia v. (C. C. A.) 848 

Griggs V. Nadeau (C. C. A.) 781 

(irosberg. M. Werk Co. v. (O. O. A.) 9^S 

G. S. Baxter & Co., In, re (D, G.) 307 

Guaranty Trust Co. of New Tork, King- 

dom of Roumania v. (C. O. A.) 341 

Guaranty Trust Co. of New York v. Mc- 

Cabe (G. C. A.) 699 

Gulfport, The (C. C. A.) 577 

Gunning Boiler & Macliine Co., Leary v. 

(C. C. A.) 1020 

Ilamburg-American Steam Packet Oo. v. 

United States (0. C. A.) 747 

Harmon, Northwest Auto Co. v. (0. 0. A.) 832 
Harms Co. v. Ooraell Steamboat Co. (C. 

C. A.) 845 

Harrell v. Atlas Portlaud Cément Oo. (C. 

C. A.) 83 

Harris v. Bell (C. C. A.) 209 

Hart, Gouge v. (D. O.) 802 

Hart, Nortb American Union v. (C. C. A.) 390 
Hartford, Inc., Lyon Non-Skid Co. v. (0. C. 

A.) ....1021 



Page 
Harvey, Pacific Coast Casualtv Co. v. (0. 

C. A.) 9-"2 

îîarvey Go. v. T'nited States (C. C. A.)... 1020 
îlaves Wheel Go., American Distributing 

Go. v. (!). G.) 109 

Hewitt V. Spever (G. G. A.) 3ti7 

Hiller. Ex parte (D. G.) S71 

Ho<]gcs, Simmons y. (C. C. A.) 424 

Hodson V. United States (G. G. A.). ..... . 421 

Hollinsswortii, .Tacobs v. (C. C. A.) 1020 

Hookstratten Gigar Oo., Gole v. (G. C. 

A.) : 62.1 

Horowitz, In re (G. C. A.) lOCÎ 

Houston lîelt & Ternjinal 11. Go. v. United 

States (C. C. A.) 1 

Houston Oil Go. of Texas v. Stàte of Tex- 
as (C. G. A.) 572 

Howard, Shaffer v. (D. C.) 873 

Howe & Co., Dixon v. (Ç. C. A.) 19 

Hubbard-Zemurray S. S. Oo., Aktiesslska- 

bet Stavangeren v. (C. C. A.) _. . . 67 

Hudson River Dav Line, Individual Drink- 

ing Cup Oo. V. (O. C. A.) 020 

Humphrey Comell Ce, Shredded Wheat 

Co. V. (C. O. A.) S60 

Hurt, Carson v. (C. C. A.) 30 

Individual Drinldng Cup Co. v. Errett 

(C. C. A.)........... 620 

Individual Drinking Cup Oo. v. Hudson 

River Day Line (0. C. A.) 620 

Individual Drinking Cup Co. v. Public 

Service Cup Go. (O. O. A.) 620 

Individual Drïnkiag Cup. Co. v. Union 

News Co. (G. C: A.) 625 

Inmachuck Dredging Co., Fairhaven Wa- 

ter Oo. V. (O. 0. AA 1020 

International Agr. Corporation v. Sparks 

(D. C.) 318 

International & G. N. R, Oo., Texas Oo. v. 

(0. O. A.) 742 

Irving. The Washington (C. C. A.) 797 

I. T. S. Rubber Co., Panther Rubber Mfg. 

Co. V. (O. C. A.). 2.53 

Ivins, Jacob v. (0. C. A.) 431 

Jacob V. Ivins (O. C. A.) 431 

Jacobs v. HolUngsworth (C. C. A.) 1020 

James "W. Elwell & C<>., United States v., 

two cases (C. C. A.) 939 

.Tay v. Weinborg (D. C.) 469 

John E. McAUister, The (C. C. A.) 790 

John Wanamaker, New Tork, Meceano, 

Limited, v. (C. C. A.) 250 

John Wiinamaker. New York, Meceano, 

Limited, V. (0. O. A.) 450 

Jones, Spe<nal School Dist. of A.shdown, 

Ark., V. (C. C. A.) 440 

Joseph P. Clinton, The (C. 0. A.) 977 

Kalehua v. Clark (O. O. A.) 612 

Kawneer Mfg. Co., Detioit Showease Co. v. 

(0. C. A.) 234 

Kaye -v. Eddystone Ammunition Corpora- 
tion (D. 0.) 654 

Keliher v. Mitchell (D. 0.) 904 

Kelly V. United States (C. 0. A.) 94T 

Kennellv v. Frederick Starr Contraeting 

Co. (0. C. A.) 229 

Kerner, In re (G. O. A.) .... , 993 



xn 



250 FEDERAL RErORTEE 



Page 
Ketchum v. United States (C. C. A.) . . . . 107 

King, McLatehy v. (D. C.) 020 

King V. Smith (C. C. A.) 145 

King, United States v. (D. C.) 90S 

Kingdom of Roumania v. Guarauty Trust 

Co. of New York (0. O. A.) 341 

Kinkead, United States v. (C. C. A.) 692 

Kroger Grocery & Baking Co. v. Retail 
Clerks' International Protective Ass'n, 

Local No. 424 (D. C.) »"0 

Kurt, Garrison v. (C. C. A.) 1020 

Kurtz Brass Bed Co., Pétition of (D. C.) . . . 110 

Lake Shore & M. S. R. Co., General Inv. 

Co. V. (C. C. A.). . . . 160 

Lake Torpédo Boat Co., Electric Boat Co. 

V., two cases (C. C. A.) 101& 

Lamachia, Kx parte (D. O.) 814 

Langbehn, Essex S. S. Co. v. (C. C. A.) . . . 9cS 
Laser Grain Co. v. United States (C. C. A.) 826 
Lauria v. B. I. Du Pont de Nemours & 

Co. (C. C. A.) .S5.S 

Law, United State.s v. (C. C. A.) 218 

Lea, Baltimore & O. R. Co. v. (0. C. A.). .1018 
Leary v. Gunning Boiler & Machine Co. 

(C. C. A.).... 1020 

Lee Mow Lin v. United States (C. C. A.). . 604 

Le .More, In re (O. C. A.) 6 

Lesarois v. Greeiiberg (C. C. A.) 848 

Light V. Gray dt Davis (D. C.) 631 

Liverpool, Brazil & River Plate Steam 
Nav. Co. V. Brooklyn Eastern Dist. Ter- 
minal (C. C. A.) 1021 

Llanheris, The (D. C.) 476 

Lockhart v. United States (0. C. A.> 610 

Long, In re (C. C. A.) 983 

Long-Landreth-Schneider Co., Ruud Mfg. 

Co. V. (0. C. A.) ....: 860 

Longée v. Piekrell (O. C. A.) 737 

Louis Dejonge & Oo., Oriental Tissue Co. 

V. (O. C. A.) 627 

Loui.sville & N. R. Co., Western Union Tel. 

Co. V. (C. C. A.) 199 

Lowe, Northern R. Co. of New Jersey v. 

(C. C. A.) ....856 

Lyle V. Perry (D. C.) 307 

Lyon Non-Skid Co. v. Edward V. Hart- 
ford. Inc. (C. O. A.) 1021 

Lyttle, Fifth Nat. Bank of City of New 
York V. (O. O. A.) 361 

McAUister. The John B. (C. C. A.) 790 

McCahe, Guaranty Trust Co. of New York 

V. (C. O. A.) 690 

McCann, In re (D. C.) 1006 

McOarthy, United iStates v. CD. O.) 800 

MacDonald, Mandeville v. (G. C. A.) 607 

McKeeman, Omaha & O. B. St. R. Co. v. 

(C. C. A.) 386 

McLatehy v. King (D. C.) 020 

McNeil-Higgins Co,, Old Dominion S. S. 

Co. y. (C. C. A.). , 1021 

Madison, The (C. C. A.) 850 

Mahoney, The Rosalie (C. C. A.) 796 

Malley v. Crocker (C. C. A.) 817 

Mandeville v. MacDonald (C. C. A.) 607 

Manton-Gaulin Mfg. Co. v, American Bot- 

tle Cap Co. (D. C.) 865 

Manufacturers' Wholesale Furniture Co., 

In re (D. C.) 116 

Mary B. Curtis, The (O. C. A.) 9 



Page 
Mnsterson v. Mississippi Valley Trust Co. 

(C. C. A.) dm 

Meadow v. Nash (D. C.) 911 

Mcceano, Limited, v. John Waniimaker, 

New York (C. C. A.) 250 

Meccano, Limited, v. John Wanamakcr, 

New York (C. C. A.) 4.50 

Mever, Appeal of (C. C. A.) 707 

Miller Rubber Co., Featheredge Rubber Co. 

V. (D. C.) 255 

Mills & Gibb, Chapman v. (C. C. A.) 1018 

Minerais Séparation, Butte & Superior 

Mining Co. v. (C. C. A.) 241 

Minneapolis, St. P. & S. S. M.. R. Co., 

United States v. (C. C. A.) 382 

Missis.-îippi Valley Trust Co., Masterson v. 

(C. C. A.) 996 

Mitchell, In re (D. C.) lOO,"} 

Mitchell, Keliher v. (D. C.) 004 

Monkshaven, The (D. C.) 1000 

Sloore v. Norristown Trust (Jo. (C. C. A.) 446 
Moore Knitting Co. v. Roxford Knitting 

Co. (D. C.) 288 

Moore & Tierney v. Roxford Knitting Co. 

(D. C.) 278 

Mosby, Borden's Condensed Milk Co. v. 

(C. C. A.) 8.39 

M. S. Fer.sko, Inc., In re (C. C. A.) 3.57 

M. Werk Co. v. Grosberg (C. C. A.) 908 

M, & H. Gordon, In re (D. C.) 1023 

Nadeaii, Griggs v. (C. C. A.) 781 

Nash, Meadow v. (D. C.) 911 

Nashville, C. & St. L. Ry., Western Union 

Tel. Co. V. (C. C. A.) 207 

Natura Co., Unite<l States v. (D. C.) 925 

Naturalization of Aliens in Service of 

Anny OT Navy of United States, In re 

(D. 0.) 316 

Neasham, New York Life Ins. Co. v. (C. 

C. A.) 787 

Newman, Appeal of (C. O. A.) 357 

New York Life Ins. Co. v. Neasham (C. C. 

A.) 787 

New York Trust Co. v. Carpenter (C. C. 

A.) 668 

Noble, Fleming v. (C. O. A.) 733 

Nolan, Remington Typewriter Co. v. (C. 

C. A.) 685 

Norfolk & W. R. Co., Partola Mfg. Co. v. 

(D. C.) 273 

Norristown Trust Co., Moore v. (C. C. 

A.) 446 

North American Union v. Hart (O. C. A.) . . 390 
Northern R. Co. of New Jersey v. Lowe 

(C. C. A.) &56 

Northwest Auto Co. v. Harmon (C. O. A.) 832 

Old Dominion S. S. Co. v. McNeil-Higgins 

Co. (C. C. A.) 1021 

Oliver V. Seaboard Air Line Ry. (D. C). . 652 
Oison V. Chicago, B. & Q. R, Co. (C. C. A.) 372 
Omaha & C. B. St. R. Co. v. McKeeman 

(C. O. A.) 386 

Oriental Tissue Co. v. Louis Dejonge & 

Co, (C. C. A.) 627 

Oscar Smith & Sons Co., George v. (C. 

C. A.) 41 



Pacific Coast Casnalty Co. v. Harvey (C. 
C. A.) 



952 



CASES REPORTBD 



Xlll 



Vag:> 

Pacifie Mail S. S. Co. v. Benel)y (C. C. A.) 444 

Panama R. Co. v. Toppin (C. C. A.) 989 

Pantli.cr Ruhber Mfq. Co. v. I. T. S. Rub- 
ber Co. (C. C. A.) 253 

Partola Mfg. Co. v. Xorfolk & W. R. Co. 

(D. C.) 273 

Patchogue, The (C. C. A.) 850 

Penns.vlvania R. Co. v. Rrown ((!. C. A.). . {51-3 

Pennsylvania R. Co., Doole.v v. (D. C.)... 142 
Penns3'lvania Steel Co. of IS'ew Jersev, 

Venncr v. (1). C.) 202 

Penia v. Rnpid R. Co. (C. C. A.) 728 

Perry, I.yle v. (D. C.) 307 

Pet-rson, Gray's Harbor Tugboat Co. v. 

(C. C. A.) 956 

Petrowsky, Delaware, L. & W. R. Co. v. 

(C. C. A.) 554 

Phelan, United States v. (I). C.) 927 

Phillips, Appeal of (C. C. A.) 96 

Phœnix Planing Mill, In re (U. C.) 898 

Phœnix Planing Mill, In re (D. C.) 899 

Pickrell, Lougee v. (C. C. A.) 737 

Pittsburg, The (C. C. A.) 9 

Poeahontas. The (D. C.) 867 

Postal Telegraph-Cable Co. v. Darrow 

(O. C. A.) 581 

Preston v. Western Union Tel. Co. (D. C.) 480 

Prospect Leasing ("o., In re (C. C. A.) .... 707 
Prudential Outfitting Co. of Delaware, In 

rc (D. C.) . 504 

Public Service Commission of Nevada, Wa- 

ter Co. ot Tonopah v. (D. C.) 304 

Publie Service Cup Co., Individual Drink- 

ing Cup Co. V. (C. C. A.) 620 

Puziello, Société Anonyme de la Distillerie 

de la Liqueur Bénédictine de L'Abbaye 

de Fecamp v. (D. C.) 028 



Queeus, The (C. C. A.)... 



843 



Rankin, Graff v. (0. C. A.) 150 

Rapid R. Co., Perna v. (C. C. A.) 728 

Rayford Truek & Tractor Co., In re 

(D. C.) 634 

Rebeeea, The (C. C. A.) 1021 

Rederiaktiebolaget Amie v. TJniversal 

Transp. Co. (C. C. A.) 400 

Rederiaktieholaget Atlanten. Aktieselskabet 

Korn-og Foderstof Kompagniet v. (C. C 

A.) .. 935 

Reed v. Barnett Nat. Bank of Jacksonville 

(C. C. A.) 983 

Remington Tj'pewriter Co. v. Nolan (C. 

C. A.) 685 

Renfrew Mfg. Co., Simplex Lithograph Co. 

V. (C. C. A.) 863 

RepuMic Bag & Paper Ce, United States 

V. (C. C. A.) 79 

Retail Clerks' International Protective 

Ass'n, Local No. 424, Kroger Grocerv & 

Bakinï Co. v. (D. C.) '... 890 

KMne, The (C. C. A.) .' 180 

Ricaud v. American Métal Co. (C. C. A.). . R^t" 

River Meander, The (C. C. A.) 1022 

River Spinning Co., United States v. (C. C. 

A.) 5sr. 

Ronan, The Ellen M. (C. C. A.) 797 

Rosalie Mahonev. The (C. C.. A.) 795 

Rosenstein.Galbraithv. (0. C. A.) 445 



Page 

Rosenthal & Co., Calder & Richmond v. 
(D. C.) 507 

Roxford Knitting Co., Moore & Tierney y. 
(D. C.) 278 

Roxford Knitting Co., William Moore Knit- 
ting Co. v. (D. C.) 288 

Royal Dutch West India Mail, United 
States V. (D. C.) 913 

Rnnd Mfg. Co. v. Long-Landreth- Schneider 
Co. (C. C. A.) 860 

Rutter, Geliret Bros, v, (O. C. A.) 447 

St. Louis Soiithwestern R. Co. of Texas, 

Consolidated Fuel Co. v. (C. C. A.) 395 

Sanchez v. Atlantic Coast Line R. Co, 

(D. C.) 638 

Sandusky Auto Parts & Motor Truek C-o., 

In re (C. C. A.) 185 

Sandusky Auto Parts & Motor Truek Oo., 

In re (C. O. A.) 191 

Sandusky Auto Parts & Motor Truek Co., 

In re (O. C. A.) 192 

Sandusky Auto Parts & Motor Truek Co., 

In re (C. C. A.) 193 

San Juan, The (C. C. A.) 93 

Saturnus, The (O. O. A.) 407 

Schall v. Camors, two cases (C. C. A.) . . . . 6 

Schultz, In re (O. C. A.) 103 

Scott, In re (D. O.) 647 

Seaboard Air Line Ry., Oliver v. (D. C). . 652 

Security, The (D. C.) 92.3 

Seguranca, The (C. O. A.) 19 

Sexton Co., Auto Vacuum Freezer Co. v. 

(D. O.) ;.. 459 

Shaffer v. Howard (D. C.) 873 

Shredded Wheat Co. v. Humphrey Cornell 

Co. (C. O. A.) 960 

Siegel v. Southern Pac, Co. (O. C. A.)... 1022 

Silverman, Frederick v. (C. O. A.) 75 

Simmons v. Hodges (C. C. A.) 424 

Simplex Lithograph Co. v. Renfrew Mfg. 

Co. (C. C. A.) 8fi3 

Sims, Chapman v. (C. C. A.) 991 

Sloan, Buckeve Cotton Oil Co. v. (C. C. A.) 712 

Smith. King v. (O. O. A.) 145 

Smith & Sons Co., George v. (C. C. A.) 41 

Société. Anonyme de la Distillerie de . la 

Liqueur Bénédictine de L'Abbaye de Fe- 
camp V. Puziello (D. C.) 928 

Southern Pac. Co., Siegel v. (0. C. A.). . . .1022 
Sparks. International Agr. Corporation v. 

(D. et 318 

Spécial School Dist. of Ashdown, Ark., v. 

Jones (C. C. A.) 440 

Spencer v. Babylon R. Co. (C. C. A.) 24 

Speyer, Hewitt v. (C. C. A.l 307 

Spies V. Union Pac. R. Co. (C. C. A.).. 434 
Starr Contracting Co., Kennelly v. (C. C. 

A.) 229 

State of Texas, Houston Oil Co. ot Texas 

V. (0. C. A.) . 572 

Stellwagen v. Clum (C. C. A.) 1022 

Stephens, Feick v. {C. C. A.t 185 

Stephens, Feick v. {C C. A.) 191 

Stephens v. Ilnipn .Sav. Bank & Trust Oo. 

of Cincinnati (C. C. A.) 192 

Stephens v. Union Sav. Bank & Trust Co. 

<]f Cincinnati (C. C. A.) 193 

StriimlH'i'g Motor Devices Co. v. Arnson 

(C. C. A.) 1023 



XIV 



250 FEDERAL REPORTER 



Stuart, Bcaven v. (C. C. A.) 972 

Sullivan, United States v. (D. C.) 632 

Terrell Oo., ïn re (D. 0.) 317 

Texas Co. v. Iiiteniational & G. N. R. Co. 

(C. C. A.) 742 

Toppin, l>;niama II. Co. v. (C. C. A.) 989 

Transit, The (O. C. A.) 71 

Triangle Film Corporation v. Artcraft Pic- 

turfis Corporation (C. C. A.) 981 

Tripplehorn v. Cambron (C. C. A.) 605 

Twin State Gas & Electric Oo., Devost v. 

(O. C. A.) 349 

Union Dairy Co. v. United States (C. C. 

A.) 231 

Union News Co., Individual Drinking -Cup 

Co. V. (O. C. A.) 625 

Union Pae. R. Oo., Spies v. (0. 0. A.) 434 

Union Sav. Bank & Ti'ust Co. of Cincin- 
nati, Stephens v. (0. 0. A.) . 192 

Union Sav. Bank & Trust Co. of Cincin- 
nati, Stophens v. (C. C, A.) 193 

United States, Ash Sheep Cô. v. (C. C. A.) 591 
United States v. Ash Sheei) Co. (C. C. A.) 592 

United States, Barbalatt v. (0. C. A.) lOlS 

United States, Blaokman v. tC. C. A;) 449 

United States v. Brainerd (D. C.) .1011 

United States, Cameron v. (C. C. A.) 94.S 

United States v. .Carter (D. 0.) 299 

United States v. Cliasé Nat. Bank (0. O. A.) 105 
United States v. CWeago; M. & St. P. R. 

Ca(C. O. A.) 442 

United States v. Chiéagt) & A. R. Co. (C. 

C. A.). ;'.,....;.. 101 

United States, Glark v. (O. C. Â.) 449 

United States, Ci«amer v. {C. G. À.) 1019 

United States, Daecliè v. (C. O. A.) 566 

United States, De ^f oss v. (C. C. A,) 87 

United States, Erber v. (C. C. A.) 1019 

United States v. First Nat. Bank (D. C). . 299 

United States, Fischer v. (O. C. A.) 793 

United States v. Forbes (D. C.) 299 

United States, Qalen v. (O. C. A.) {>47 

United States, Gee. Woe v. (C. C. A.)... . . . . 428 

United States, G. F. Harvey Oo. v. (C. C. 

A.) ..1020 

United States, Graboyes y. (C. C. A.) 793 

United States v. Ç^rahî^m & Irvine (I>. C.) 499 
Unite-1 Stntes, Hamburs-American Steam 

Packet Co. v. (C. C. A.) 747 

United States, Hodson v. (G. C. A.). 421 

United States, Houston Belt & Terminal 

R. Co. V. (C. C. A.) 1 

United States v. James W. Elwell & Co., 

two cases (C. C. A.) 939 

Unite<l States, Kelly v. (C. C. A.) 047 

TTnited States, Ketehum v. (G. 0. A.) 107 

United States v. Kint; (D. C.) 90S 

United States v. Kinkead (C. 0. A.) 692 

United States, Laser Grain Oo. v. (0. O. A.) 826 

United States v. IjftW (C. O. A.) 21? 

United States, Lee Mow Lin v. (C. C. A.) . . 694 

United States, Lockhart v. (C. O. A.) 610 

United States v. McCarthy (D. C.) 800 

TJnited States y. Minneanolis, St. P. & S. 

S. M. R. Co. (C. C. A.) 382 

United States v. Natura Co. (D. C.) 925 

United States v. Phelan (D. C.) 927 



Page 
United States v. Republic Bag & Paper Co. 

(O. C. A.) 79 

United States v. River Spinning Co. (C. 

C. A.) 586 

United States v. Royal Dutch West India 

Mail (D. C.) 913 

United States v. Sullivan (D. C.) 632 

United States v. Van Werkhoven (D. C.).. 311 
United States, Union Dairy Co. v. (C. 0. 

A.) 231 

United States, Warren v. ÏC. 0. A.) 89 

United States v. Welsh (D. C.) 309 

XJnitéd States v. Woo Jan (C. C. A.) 595 

Usited States Const. Co., Whitney Central 

Trust & Savings Bank v., two cases (C. 

O. A.) 784 

United States Métal Cap & Seal Co. v. 

American Kç,yless Kap Corporation (C. 

C. A,) 857 

United. States Aletal Cap & Seal Co. v. 

American Keyleae Kap Corporation (D. 

C). 1024 

United States & Mexiean Trust Co. v. 

United States & Slexican Trust Co. (C. 

O. A.) 377 

United States & Mexiean Trust Co., Wat- 

son V. (0. C. A.) 377 

Universàl Transp. Co., Rederiaktiebolaget 

Amie v. (O. C. A.) 400 

Vanadis. The (D. C.) 1010 

Van Wcrkhoven, United States v. (D. C.) 310. 
Vènner v. Pennsylvania Steel Co. of New 

Jersey fD. C.) 292 

Viking, Thé (C. G. A.) 1020 

Voorhees y. ^tna Life Ins. Co. (D. G.)... 484 

Walsh Gonst. Co. v. Clereland (D. C.) 137 

Wanamaker, New York, Meccano, Limited, 

y. (G. G. A.) 250 

W^anamaker, New York, Meccano, Limited, 

y. (C. C. A.) 450 

Wai-ren v. United States (C. C. A.) 89 

Washington, The (0. C. A.) 436 

Washington. Irving, The (C. C. A.) 797 

Water Go. of Tonopah v. Public Service 

Gommission of Nevada, (D. G.) 304 

WatsOn V. United States & Mexiean Trust 

Co. (C. C. A.) 377 

W. B. Terrell Co., In re (D. G.) 317 

Wéinberg, Jay v. (D. C.) 469 

Weisz, In re (D. G.) 1008 

Wèlsh, United States y. (D. C.) .309 

Werk Co. v. Grosberg (C. C. A.) 968 

Wfestbrook, Ex parte (D. G.) 636 

Western Pac. E. Go., Equitable Trust Co. 

of New York v. (C. G. A.) 327 

Western Union Tel. Go. v. Atlanta & W. 

P. R. Co. (G. G. A.) 208 

Western Union Tel. Go. v. Louisville & N. 

R. . Co. (G. G. A.) 199 

Western Union Tel. Co. v. Nashyille, O. 

& St L. Ry. (G. G. A.) 2OT 

Western Union Tel. Co., Preston v. (D. C.) 480 

Whitney, In re (D. C.) 1005 

Whitney Central Trust & Savings Bank v. 

United States Const. Co., two cases (C. 

C. A.) 784 



CASES KEPOUTED 



XV 



William A. Sexton Co., Auto Vacuum 
Freezer Co. v. (1>. C.) 

William Moore Knitting Co. v. Koxford 
Knitting Co. (U. C.) 

Williams, In re (D. C.) 

Windrush, The (C. C. A.) 



Page 
459 

288 
288 
180 



Woo Jan, United States v. (C. C. A.). 
Woo Shing v. Fluckey (C. C. A.)... 
Wylde V. Cowin (0. C. A.) 



Yanyar, Ex parte (D. C.) . . 
Youugken, David v. (C. C. 



A.) 



Page 

595 

, 598 

, 403 

. 871 
208 



CASES 



ARGUED AND DETERMINED 

IN THE 

UNITED STATES CIRCUIT COURTS OF APPEALS 
AND THE DISTRICT COURTS 



PIOUSTON BELÏ & TERMINAL RY. CO. v. UNITED STATES. 

(Circuit Court of Appeals, Fifth Circuit. April 10, 1918.) 

No. 3135. 

1. Interxal Revenue <g=39 — Ocrpokation Excise Tax — Cokpoeations Sub- 

JECT To Tax. 

A terminal railway company, organized for the purpose of perforining 
terminal service for four railroad conipanies which were its stockholders, 
having lM;en legally organized as a corporation capable of earning and 
paying dividends, is subject to Corporation Excise Tax Act Aug. 5, 1909, 
c. G, .'!G Stat. 112, thougli the companies owning its stock organized the 
terminal company merely to provide a eonvenient joint ageucy for the 
performance of certain of their duties as carriers without any idea of 
deriving a profit. 

2. Intbrkal Revenue <g=39 — Corporation Excise Tax — "Income." 

Four railroad conipanies operating in Texas organized a terminal com- 
pany subscribing and paying for its capital stock in equal parts. In 
ordcr to finance the organization, it was necessary to borrow a large 
sum of money, and, the crédit of the terminal company not being sufti- 
cieiit to obtain the needed loan, it was arraiiged that the several rail- 
road companies should pay in equal parts the annual interest and 
sinking fund requirements of a loan from a trust company to the ter- 
minal company which was to be evidenced by bonds secured by a mort- 
gage. Corporation Excise Tax Act Aug. 5, 1909, imposes an excise tax 
measured by their net inconies on cori)oratioiis for the privilège of doing 
business in a corporate capacity. Held that, as the title to the property 
vested in the terminal company subjeot to the mortgage and the interest 
paymeiits were for its benefit, such interest payments should be treated 
as an income for the puri)ose of ascertaining the amount of the excise 
tax ; it beiug immaterial whether the railroad companies were primarily 
liable for the interest payment. 

[Ed. Note. — For other définitions, see Words and Phrases, First and 
Second Séries, Income.] 

In Error to the District Court of the United States for the Southern 
District of Texas ; Waller T. Burns, Judge. 

Action by the United States against the Houston Belt & Terminal 
Railway Company. There was a judgment for the United States, and 
défendant brings error. Affirmed. 



<©=5For other cases see same topic & KBY-NUMBBR in ail Key-Numbered Digests & Indexes 
250 F.— 1 



2 250 FEDERAL REPORTER 

Andrews, Streetman, Burns & Logue and R. C. Fulbright, ail of 
Hoyston, Tex., for plaintiff in error. 

John E. Green, Jr., U. S. Atty., of Houston, Tex., for the United 
States. 

Before WALKER and BATTS, Circuit Judges, and GRUBB, Dis- 
trict Judge. 

GRUBB, District Judge. This is a writ of error to a judgment of 
the District Court of the United States for the Southern District of 
Texas in favor of the défendant in error, the United States, against 
the plaintiff in error for the amount of taxes claimed to hâve been due 
and unpaid under the corporation tax law of August 5, 1909 (36 Stat- 
utes at Large, 11), for the years 1909, 1910, and 1911. The case was 
tried by stipulation before the District Judge without a jury, and the 
error relied on is that the évidence does not support the judgment ren- 
dered by him, The évidence was partly stipulated and partly oral, but 
there was not any dispute of fact on the trial below, and but a single 
question of law is presented for décision. 

[1,2] The plaintiff in error was organized under the laws of the 
state of Texas providing for the organization of terminal railway com- 
panies. It was organized for the purpose of performing terminal serv- 
ices for four railroad companies, which were its stockholders, and 
which are referred to as "tenant lines." In order to finance its or- 
ganization, it was necessary to borrow a large sum of money, and the 
crédit of the terminal company was not sufficient to accomplish the 
needed loan. An arrangement was reached by which the tenant lines 
agreed with the Central Trust Company of New York, and with the 
terminal company, that they would pay in equal parts the annual in- 
terest and sinking fund requirements of a loan from the Central Trust 
Company to the terminal company, to be evidenced by bonds in the 
amount of $5,000,000, secured by a mortgage on the property of the 
terminal company. The capital stock of the terminal company was 
subscribed for and paid for by the four tenant lines in equal parts, 
and was in the amount of $25,000. The current operating expenses 
of the terminal company were to be paid by the tenant lines ratably 
according to the extent of the user by them respectively, to be deter- 
mined according to a wheelage basis. The stock of the tenant lines 
was agreed to be and in fact was pledged to the Central Trust Company, 
to secure the loan, with the privilège of sale, in case of default on 
the part of any tenant company in its payments of interest and for the 
sinking fund. In case of such default, provision was made for the 
élimination of the defaulting tenant line from the privilège of being 
served hy the terminal company and from the use of its property. It 
was also provided that any of the tenant companies could withdraw, 
under certain conditions, from the agreement, and it was thereby and 
thereafter relieved from further obligation for interest and sinking 
fund payments. The tenant lines became liable to pay the principal 
of the loan, only through their agreement to pay the sinking fund in- 
stallments, while they continued tenant lines. 

The terminal company executed the bonds and mortgage which 



HOUSTON BELT & TERMINAL BY. CO. V. UNITED STATES à 

secured them and was directly liable to the Central Trust Company 
for the loan. Hovvever, the installments of interest and sinking fund 
were not paid by the tenant lines to the terminal company and by it, 
in turn, paid to the Central Trust Company, but were paid in quarterly 
parts by the respective tenant lines to the Central Trust Company. The 
title to the terminal propcrties and the ownership of them was in the 
terminal company, subject to the mortgage. AU earnings of the ter- 
minal company, received from others than the four tenant companies, 
were used in réduction of operating expenses, and so distributed upon 
the same basis that operating expenses were paid, as between the ten- 
ant companies. Advances to cover operating expenses were made 
pro rata by the tenant companies from time to time. The relations 
of the tenant companies, the terminal company, and the Central Trust 
Company were fixed by three agreements, executed contemporaneously, 
and the course of business during the years in question, 1909, 1910, 
and 1911, was, as stated, in pursuance of the three agreements. The 
terminal company paid a corporation tax during each year, but, in es- 
timating it, did not take into account interest payments made by the 
four tenant companies to the Central Trust Company in pursuance of 
their contractual obligation during each of the three years. The act 
of August 5, 1909, permits a déduction of interest paid by the corpo- 
ration, but not in excess of interest on the amount of its capital stock. 
The government claims that the amounts paid by the tenant compa- 
nies to the Central Trust Company were income received by the termi- 
nal company, and that, though it ail went to pay interest, only an 
amount equal to the interest on the amount of its capital stock was dé- 
ductible under the terms of the corporation tax law. The amount sued 
for represents the taxes due on the amounts paid by the four tenant 
companies, on account of interest, to the Central Trust Company dur- 
ing the three tax years, less the interest on the amount of the capital 
stock of the terminal company. Payments on account of sinking fund 
requirements during the same years are conceded by the government 
not to hâve constituted income. 

The contention of the plaintiiï in error is that the tenant companies 
were principal debtors of the Central Trust Company and not mère 
guarantors of the terminal company, and that the payments, never 
having been received into the treasury of the terminal company, con- 
stituted no part of its income for the years in question, and were prop- 
erly left out of account by the terminal company in returning its cor- 
poration tax. This is the issue between the parties. Its solution dé- 
pends upon whether the payments made by the tenant companies to the 
Central Trust Company were properly income of the terminal company 
under the corporation tax law. That law was held by the Suprême 
Court in the case of Anderson v. Forty-Two Broadway Co., 239 U. S. 
69, 36 Sup. Ct. 17, 60 L. Ed. 152, to be "not in any proper sensé an in- 
come tax law, nor intended as such, but was an excise upon the con- 
duct of business in a corporate capacity, the tax being measured by réf- 
érence ta the income in a manner prescribed by the act itself ." Section 
38 of the Act of 1909, c. 6, 36 Statutes at Large, 112, provides that the 
taxable net income shall be ascertained by deducting from the gross 



4 250 FEDKKAL RErORTER 

amount of income among other things, "interest actually paid within 
the year on its bonded or other indebtedness, * * * not exceeding 
the paid up capital stock of such corporation, * * * ovitstanding 
at the close of the year." It is clear that net income is made by the law 
the mère measure of the excise tax and that the law defines what net 
income for this purpose shall consist of. The fact, if it were a fact, 
that the imposition of the tax in the statutory method might resuit, 
in certain cases, in double taxation, or in other inequity, or that the net 
income defined by the statute might differ f rom an accountant's défini- 
tion of net income, is not important in applying the statute. The law 
imposed an excise tax, imposed upon the doing of business in a corpo- 
rate capacity, and measured in amount by its net income as thérein de- 
fined. 

It may be that the tenant companies organized the terminal company 
to provide a convenient joint agency for the performance of certain of 
their duties as carriers, and with no view to profit to be derived from 
its organization. It was, however, legally organized as a corporation, 
capable of earning and paying dividends to its stockholders, and the 
fact that it has not done so does not make it the less a corporation en- 
gaged in business and organized for profit, within the meaning of the 
corporation tax law. Profit from its organization and opération could 
resuit to its stockholders in other ways than in dividends. If the tenant 
companies chose to avail themselves of an agency, owned by them, 
which did business in a corporate capacity, then under the act of Au- 
gust 5, 1909, they became liable through it for the payment of an ex- 
cise tax for this privilège. The voluntary payment of part of the tax 
concèdes this. Boston Terminal Co. v. Gill, Collector, 246 Fed. 664, 
C. C. A. . 

The tenant companies made use of the facilities and services of the 
terminal company in two ways : First, by the use of its property ; and, 
second, through the services of its employés. Compensation for the 
services of its employés was returned by the payment by the tenant 
companies of a pro' rata part of its actual operating expenses. The 
only other return from the tenant companies to the terminal company 
provided for was the payment of interest and sinking fund install- 
ments. Unless thèse represented compensation for the use of the ter- 
minal company's property, there was none. The property sa used was 
owned by the terminal company, not by the tenant companies, and 
compensation for its use was properly due to the terminal company as 
owner. Upon withdrawal from such use by a tenant company, its 
obligation to continue interest and sinking fund payments ceased. 
This is persuasive that the considération for such payments was the 
user of the property of the terminal company. When the sinking fund 
installments fully paid the mortgage indebtedness, the property became 
the unincumbered property of the terminal company. The payments 
of interest by the tenant companies were not yoluntary, even as to the 
terminal company. The tenant companies cd-^enanted with the termi- 
nal company to make such payments, and, in case of default, a provi- 
sion was made in the agreements for the exclusion of any that default- 
ed from the privilèges they enjoyed in the terminal company's facili- 



HOUSTON iiELT & TEKMINAL KY. CO. V. UNITED STATES 5 

ties. Tt seems clear that pa3'ments of interest made iinder such an ar- 
rangement were made in lieu of compensation for the enjoyment of 
the property uscd and were in the nature of rent received by the termi- 
nal company and to be accounted for as part of its income, as rent 
would be^ The fact that the pa3'ments were to be made directly to the 
Central Trust Company by the tenant companies is not important, if 
there existed an obligation on the part of the tenant companies to the 
terminal company to make them for its benefit, and if the considération 
of such obligation was the privilège accorded the tenant companies to 
use the property of the terminal company. 

The cfïect of the arrangement was the same as if the tenant compa- 
nies had expressly agreed to pay rental for the use of the premises in 
the amount of the interest and sinking fund payments, and, to avoid 
circuity, the payments by mutual consent were made direct to the niort- 
gagee. If the owner of a building, as a condition of securing a loan on 
it, should consent that the mortgagee might collect the rents and apply 
them in réduction of the mortgage debt, the owner would still be re- 
quired to report them as income, though they were never, in fact, paid 
to him. He would benefit from their payments, as much as if they had 
been paid to him direct. The case is similar to that of Blalock v. 

Georgia Ry. & Electric Co., 246 Fed. 387, C. C. A. ■ , recently 

decided by this court, and is not distinguishable from it in principle in 
this respect. Nor is it important to détermine whether the tenant com- 
panies were guarantors of the loan of the terminal company or princi- 
pal debtors with it, in their relations to the Central Trust Company. 
As between the terminal company and the tenant companies, there 
was an independent enforceable covenant on the part of the tenant 
companies in favor of the terminal company to pay the installments of 
interest and sinking fund, for the terminal company, as they fell due — 
a covenant, upon a continued performance of which the right of the 
tenant companies to use the property of the terminal company depend- 
ed. There was also a primary and direct obligation on the part of the 
terminal company to pay the interest and sinking fund installments to 
the Central Trust Company, which obligation the tenant companies, as 
a considération for their enjoyment of the terminal company's prop- 
erty, agreed to perform. We think it clear that the payment of such 
sums, in pursuance of their covenant, was but a payment of rent by the 
tenant companies to the terminal company for the use of the premises 
occupied by them, and was properly treated as if it had been paid to 
the terminal company, and by it paid to the Central Trust Company. 

The iudgment of the District Court is affirmed. 



8 250 FEDERAL REPORTEE 

SCHALL et al. V. OAMORS et al. (two cases). 

In re LE MORE et al. 

(Circuit Court of Appeals, Fifth Circuit. January 17, 1918.) 

Nos. 3163, 3164. 

Bankbuptct <S=5363 — Pabtnehship — CtAiMS — Rioht to Pbove Aoainst Es- 
tâtes OF Pabtnees. 

Clalmant cashed drafts for a bankrupt partnerslilp, supposée! to be 
secured by blUs of lading, whieh were forged, and the drafts were not 
paid. The drafts were not signed nor negotiated by elthier partner per- 
sonally, although they had knowledge of the fraudulent System of doing 
business, and tbe proceeds were recelved and used solely for partnersbip 
purposes. Clatms on tlie drafts were proTed and allowed against the 
partnership estate. Held, under Bankruptcy Act July 1, 1898, c. 541, § 5, 
30 Stat. 547 (Comp. St. 1916, § 9589), which clearly provides for the sepa- 
rate administration of estâtes of a partnership and of the indlvidual part- 
ners, with the right of the partnership estate to prove a claim against the 
estate of a partner only In case there is a surplus in such estate after 
payment of Its own creditors, that clalmant could not aiso prove his debt 
against the estâtes of the partners and share ratably with their creditors, 
on the theory that, because of the fraud, his claim was for a tort, for 
which the partners were individually llable. 

Pétition to Stiperintend and Revise Order of, and Appeal from, the 
District Court of the United States for the Eastem District of Louisi- 
ana ; Ruf us E. Poster, Judge. 

In the matter of Albert Le More and Ed. E. Carrière, bankrupts; 
Frederick Camors and others, trustées. On pétition to revise and 
appeal by William Schall, Jr., and others, to review an order disallow- 
ing their claims. Pétition to revise dismissed. Order afErmed on the 
appeal. 

Howe, Fenner, Spencer & Cocke, of New Orléans, L,a., and Rounds, 
Hatch, Dillingham & Debevoise and Eugène Congleton, ail of New 
Yoik City, for petitioners appellants. 

J. Blanc Monroe, D. B. H. Chaflfe, and Monte M. Lemann, ail of 
New Orléans, La., for respondents appellees. 

Before WALKER and BATTS, Circuit Judges, and GRUBB, Dis- 
trict Judge. 

GRUBB, District Judge. Thèse cases were submitted together ; No. 
3163 being a pétition to revise an order of the District Court sitting 
in bankruptcy, disailowing a claim against the bankrupt estate, and 
No. 3164 being an appeal from the same order. As appeal is the 
proper remedy, the pétition to revise is ordered dismissed, at peti- 
tioners' costs. 

The appeal présents the question as to whether a claim in its nature 
a tort, arising out of a partnership transaction, may be proven against 
the individual estâtes of the partners, when the claim has been filed 
and allowed as a claim in contract against the partnership estate. This 
in volves two questions : (1) Whether a claim in tort is provable at 
ail, under section 63 of the Bankruptcy Act of 1898 (Comp. St. 19liJ, § 
9647) ; and (2) whether, in case of a partnership transaction, it «lay 

©=3For other cases see same topio & KEY-NUMBER In ail Key-Numbered Digests & luâezee 



SCHALL V. CAMOES 7 

be proven doubly — against the estate of the partner and that o£ the 
partnership. We find it unnecessary to consider the first much litigated 
question, because of the conclusion we hâve reached upon the second. 

The Bankruptcy Act of 1898, even to a greater extent than its prede- 
cessors, recognizes the séparation between a partnership and its mem- 
bers. It permits an adjudication of the partnership as an entity, as 
distinguished from the individuals composing it. It provides that the 
partnership creditors shall appoint the trustée; that the trustée shall 
keep separate accounts of partnership property and that of the mem- 
bers of the firm ; that there shall be a division in the payment of ex- 
penses of administration beween the partnership and individual es- 
tâtes, as directed by the court; that the net proceeds of partnership 
property shall be first appropriated to pay partnership debts, and the 
net proceeds of the estate of an individual partner be first appropri- 
ated to pay his individual debts, each class to bave resort only to the 
surplus of the other, if any exists ; that the court may permit the 
proof of claim of the partnership estate against individual estâtes and 
vice versa, and may marshal the assets of both classes of estâtes to 
secure an équitable distribution of property of the several estâtes. 

The scheme of administration for partnerships by section 5 of the 
présent act shows the purpose to administer partnership estâtes ac- 
cording to the équitable principle of devoting partnership property 
primarily to the payment of partnership debts, and individual prop- 
erty primarily to the payment of the debts of the individual partner. 
The machinery provided by section 5 is adapted for administration on 
this line. Récent décisions of the Suprême Court hâve emphasized 
the purpose of the statute in this respect. In the case of Miller v. 
New Orléans Fertilizer Co., 211 U. S. 496-506, 29 Sup. Ct. 176, 53 
L. Ed. 300, the court held that the distribution provided by section 5, 
preferring individual creditors of a partnership in the distribution 
of his individual property, would overrule a contrary rule that obtain- 
ed in the state of the domicile of the bankrupt. In the case of Farm- 
ers' Bank v. Ridge Avenue Bank, 240 U. S. 498, 36 Sup. Ct. 461, 60 L. 
Ed. 767, L. R. A. 1917A, 135, the court held that the method of dis- 
tribution provided in section 5 admitted of no exception, even though 
the partnership, and ail of its members, were insolvent, and the only 
fund for distribution was produced by the assets of one of the mem- 
bers, departing in this respect from the contrary rule in England. 

In the administration of the présent bankrupt law, therefore, the 
principle of the. dévotion of partnership assets to satisfy partnership 
debts, before the creditors of the individual members can resort to 
them for payment, and the reverse of this rule, should not lightly be 
departed from. If one, who is a créditer of the joint or partnership 
estate, is permitted to prove his claim against both the partnership 
estate and the individual estate of one or more of the partners, the 
principle would be infringed, if the partner or partners had individual 
creditors. If, in this case, the appellants were partnership creditors, 
their claim against the individual estâtes of the partners was properly 
disallowed. The effect of its allowance would hâve been to enable 



8 250 FEDERAL KEPOETBK 

the partnership creditor to share in the individual property of the 
partners on an equality with the individual creditors of the partners. 

It is contended by appellants that they were creditors both of the 
partnership and of the individual members. The facts from which 
their claims arise are net in dispute. The appellants were induced to 
purchase drafts of the bankrupt firm, supposed to be secured by bills 
of lading representing shipments of staves, through false représen- 
tations made to them or contained in the forged or fraudulent bills of 
lading that were attached to the drafts. The drafts were not paid. 
The claim proven against the partnership was upon the drafts as 
partnership obligations in contract. The claims attempted to be proven 
against the individual estâtes of the partners were for damages for 
the false représentation alleged to hâve been made by the partners. The 
partners were cognizant of the frauds, though the particular drafts 
were not signed or indorsed or negotiated by either partner, and nei- 
ther partner profited from the transaction, except through his interest 
in the firm. The transaction was one in the ordinary course of the 
firm business, except that it was a fraudulent one, and the proceeds 
of the drafts went to the crédit of the firm, and were used in the con- 
duct of its business. Eliminating its fraudulent character, the trans- 
action was altogether a partnership one, and would hâve supported 
proof of claim only against the partnership estate. 

It is contended that the commission of the fraud was the act of the 
partners, even though they did not, in person, sign and negotiate the 
drafts, because the fraud of their agent was imputable to them, and 
because they knew of the fraudulent System under which the firm was 
doing business. If the act of the partners, then the contention is that 
it will support a claim against the partners individually, which can be 
proven in bankruptcy against their individual estâtes, either as a tort 
or upon the theory of waiver of its tortious character. We do not think 
that the policy of the bankrupt law to subordinate firm creditors to 
the creditors of the partners individually in sharing the individual as- 
sets of the partners would permit us to entertain such a fiction. We 
think the détermination as to whether the claim is partnership, or in- 
dividual, or both, should dépend upon the real character of the trans- 
action, and, if that be unmistakably an exclusively partnership one, 
neither fiction nor implication should be resorted to to give it a différ- 
ent character. If the partners had by separate contract of guaranty 
obligated themselves to the claimants, such separate contract would 
hâve afforded a basis for a claim against their individual estâtes. So, 
if it had been shown that their individual estâtes had been enriched 
by the transaction complained of, or that they had been guilty of a 
separate and personal delinquency from that of the partnership, an 
individual obligation to make restitution to the injured claimant might 
hâve been implied. 

In the absence of a separate, individual obligation, or a showing of 
benefit moving to the partner individually from the transaction, we 
can see no reason for sustaining a double proof of claim in favor of 
the implied obligation, when it would not be sustained where the ob- 
ligation is an express one. Each partner and his property is individ- 



THE MARY B. CURTIS 9 

ually liable for ail partnership debts as between him and the partner- 
ship créditer, and this obligation is joint and several at the option of 
the créditer. But as between his individual and partnership creditors, 
under the bankrupt law, the primary liability of his property is to the 
former. It would be contrary to the policy of the bankrupt law to per- 
mit the firm créditer, by invoking such a technical rule of law, to place 
himself on a parity with the individual creditors of the partners as to 
his individual assets, and so circumvent the équitable distribution of 
partnership assets among firm and individual creditors provided for in 
the act. 

The question has been answered differently by the Circuit Courts 
of Appeal in the First and Second Circuits. The case of In re Coe, 
183 Fed. 745, 106 C. C. A. 181 (Circuit Court of Appeals, Second Cir- 
cuit), is contrary to the view expressed; while the case of Reynolds 
v. New York Trust Co., 188 Fed. 611, 110 C. C. A. 409, 39 h- R. A. 
(N. S.) 391 (Circuit Court of Appeals, First Circuit), directly sup- 
ports it. 

The order of the District Court, disallowing the claim of appellants 
against the individual estâtes of the partners, is affirmed. 



THE MARY B. CTJETIS. THE KLLIS. THE PITTSBTIRG. 

(Circuit Court of Appeals, Fifth Circuit. February 13, 1918. Rehearing 
Denied April ?,, 1918.) 

No. 310T. 

1. Admiralty <S=»106 — Appeal — Paeties. 

To an appeal l>y claiinnnts in a sviit in rem in admiralty, a surety Com- 
pany, wliichi executed the stipulation for release of the libeled vessels, is 
an indispensable party, and niust eitlier be joined or notified and a 
severance efCected. 

2. Appeal and Ebrob <S=>329 — Parties to Appeal — Bringing in by Amenu- 

MENT. 

The Circuit Court of Appeals may permit a party which has been 
omitted from an appeal, and not summoned and severed, to be brought in 
by amendment, where it appears and waives citation. 

3. Collision <s=»74 — Tow and Mooked Duedge in Canal — Fault. 

Liftelant's dredge, engaged in governnient work in the Sabine-Neches 
Canal, was lying nioored to the side of the canal on Sunday, when it was 
brought Into collision with a barge, which was passing through the canal 
in tow of two tugs, and sunk. IJeld, on the évidence, that the dredge 
was not in fault ; that it was moored In a proper place, and was kept 
as close to the bank as possible ; that it was not in fault for assenting to 
the passage of the tow, for which there was room, the canal belng 209 
feet wide ; tliat the tugs were in fault for im])i'oper navigation of the 
tow of which they were in fuU charge ; and that the barge was also in 
fault for unnecessarily allowing lier anchor to hang on her side partly 
below the water Une, which struck the dredge and caused the sinking, 
which was the principal cause of in.iury. 

4. Collision <g=3l32 — Damages — Eléments. 

l'roof of damages recoverable for the sinking of a dredge, consisting of 
évidence as to the cost of labor and matcrials used in ralsing the dredge, 

<g=5For other cases see same topLc & KEY-NUMBBR in ail Key-Numbered Digests & Indexes 



10 250 FEDERAL REPORTER 

the cost of repairs, and demurrage during the time reasonably requlred 
for maklng the repnirs, based on the rental value of the dredge, held 
properly admitted, and suffleient to snstaln the award made. 
5. CoixisioN <S=5l30 — ^Damages — Interkst. 

Whlle the allowance of interest on the award in collision cases, where 
the libelant is without fault, is diaeretionarj', the gênerai practice is, in 
cases where the amount of damages is uncertain and is matter for proof, 
to allow interest only from the date of liquidation by decree; and this 
rule is especially applicable where repairs were unnecessarily delayed by 
libelant, and where the repairs put the vessel in better condition thaii 
before collision. 

Appeals from the District Court of the United States for the East- 
ern District of Texas ; Gordon Russell, Judge. 

Suit in admiralty for collision by the Bowers Southern Dredging 
Company against the barge Pittsburg, the Sun Company, claimant, and 
the tugs Mary B. Curtis and ElHs, the D. W. Ryan Towboat Company, 
Incorporated, claimant. Decree for libelant against both claimants, and 
they appeal. Modified and affirmed. 

John Charles Harris, of Houston, Tex., for appellant Ryan Tow- 
boat Co. 

T. L,. Poster, of Beaumont, Tex., E. E. Townes, of Houston, Tex., 
and Jas. B. Stubbs, of Galveston, Tex., for appellant Sun Co. 

John D. Grâce, of New Orléans, La., F. D. Minor and F. D. Minor, 
Jr., both of Beaumont, Tex., and John Neethe, of Galveston, Tex., for 
appellee. 

Before WALKER and BATTS, Circuit Judges, and GRUBB, Dis- 
trict Judge. 

GRUBB, District Judge. This case comprises two separate appeals 
from a decree in admiralty rendered by the District Court for the 
Eastern District of Texas in favor of the appellee, the Bowers South- 
ern Dredging Company, in each appeal, and against the respective ap- 
pellant, and its coappellee. The appellees, against whom the decree 
was rendered, severed and separately appealed, joining their respec- 
tive corespondents as appellees. The cause of action arose out of a 
collision in the Sabine-Neches Canal between a dredge of the Bowers 
Southern Dredging Company and a tow and its two tugboats. The 
tugboats belonging to the D. W. Ryan Towboat Company, and the 
barge, which was being towed, to the Sun Company. 

[ 1 ] There was submitted, with the submission on the merits, a mo- 
tion to dismiss each appeal. The motion was predicated upon the f all- 
ure of the appellant to make the Lion Bonding & Surety Company an 
appellee, or to obtain as to it, in each appeal, a summon and severance. 
No notice of appeal was served on the Lion Bonding & Surety Compa- 
ny in either appeal. The Lion Bonding & Surety Company executed 
with the respective appellants a stipulation for the release of the tug- 
boats and the barge which had been seized by the libelant, and the de- 
cree appealed from was rendered against the two appellants, as princi- 
pals, and the Lion Bonding & Surety Company, as the surety for each 
of the principal respondents. The first question presented by the mo- 

®=9For other cases see same tople & KEY-JiIUMBEE in ail Key-Numbered Dlgests & Indexes 



THE MARY B. CUETIS 11 

tion to dismîss îs whetlier the Lion Bonding & Surety Company was a 
necessary party to the appeals. 

On this question, we are unable to distinguish this case ïrom the 
case of The Bylands, 231 Fed. 101, 145 C. C. A. 289, which, upon the 
authority of Estis v. Trabue, 128 U. S. 225, 9 Sup. Ct. 58, 32 L. Ed. 
437, and Ex parte Sawyer, 21 Wall. 236, 22 E. Ed. 617, held the sure- 
ty, upon a Uke stipulation, to be an indispensable party to the appeal, 
and one that should either be joined in the appeal or a severance effect- 
ed, and the surety notified of the taking of the appeal. As that case is 
the law of this circuit, and as the Suprême Court denied a certiorari 
in it, we feel bound to foUow and apply the rule there announced to 
this case. 

[2] Each of the appellants hâve filed motions to amend the pétition 
for appeal, and the citation, by making the Lion Bonding & Surety 
Company a party thereto, and for leave to file an amended appeal 
bond. The Lion Bonding & Surety Company has also appeared in this 
court, and waived the issuance and service of a citation, and moved for 
leave to join in and become a party to each of the appeals. The second 
question presented by the motion to dismiss is whether the appellants 
should be hère allowed to amend their appeal by making the Lion Bond- 
ing & Surety Company a party to it, upon its appearance and waiver 
of citation and offer to join in the appeal and become a party to it. 
In ruling on this motion to be allowed to amend, we are confronted by 
what is apparently an irreconcilable conflict in the rulings of the Su- 
prême Court. 

In the case of Estis v. Trabue, 128 U. S. 225, 9 Sup. Ct. 58, 32 L. 
Ed. 437, the Suprême Court seems to hâve held that the omission to 
make the surety a party to the appeal was jurisdictional and could not 
be amended in the Suprême Court, though no application to amend was 
submitted to the court in that case. In the case of Inland Coasting 
Company v. Toison, 136 U. S. 572, 10 Sup. Ct. 1063, 34 L. Ed. 539, 
the Suprême Court, having dismissed the writ of error because of a 
similar def ect on the original hearing, upon rehearing granted a motion 
to rescind the judgment of dismissal, to restore the cause to the dock- 
et, and to amend the writ of error by inserting certain parties as plain- 
tiflfs in error, and upon amendment the cause was ordered returned to 
the docket. In the case of Mason v. United States, 136 U. S. 581, 10 
Sup. Ct. 1062, 34 L. Ed. 545, an application to amend a writ of error, 
by adding omitted parties as plaintiffs in error or for a severance of 
such parties, was denied, and the writ of error dismissed for the defect 
in parties, without discussion. In the case of Dolan v. Jennings, 139 
U. S. 385, 11 Sup. Ct. 584, 35 L. Ed. 217, the Suprême Court held that 
a failure to join a necessary party in the appeal, or to effect a sever- 
ance, was fatal to an appeal considered four years after the final de- 
cree, and when the omitted party did not voluntarily appear before the 
court and submit himself to its jurisdiction. On page 387 of 139 U. S. 
(11 Sup. Ct. 585 [35 L. Ed. 217]) the court said: 

"More than four years bave elapsed slnce the final decrees were entered, 
and, as we hâve never had jurisdiction over the légal représentatives of the 
deceased complainant, it is impossible for us to obtain it now." 



12 250 FEDERAL EEPOETEB 

And in speaking of the case of Mason v. United States, supra, the 
court said: 

"In Mason v. United States, 136 U. S. 581 [10 Stip. Ot. 1062, 34 L. Ed. 545], 
the application to amend being niade more tlian two years aftei- the entry of 
the judgment, and the omitted parties being in no woy in court, the application 
was denied and the writ of error dismissed." 

In the case of Estis v. Trabue, cited by the court at the end of the 
extract just quoted, the writ of error was dismissed more than three 
years from the date of the final decree, the omitted parties were net 
before the court, and the court had lost jurisdiction to compel their in- 
voluntary appearance. In the case of Inland & Seaboard Coasting 
Company v. Toison, 136 U. S. 572, 10 Sup. Ct. 1063, 34 L. Ed. 539, the 
application to amend came when the time for suing out a second writ 
of error had expired. The application was for leave to amend by 
inserting the names of the omitted parties as plaintifïs in error, and 
this implied authority to appear for them in the counsel for the original 
plaintiffs in error, who made the motion to amend. In that case there 
was nothing in the "appeal papers" from which the amendment could 
be made, and consequently the cases of Moore v. Simonds, 100 U. S. 
145, 25 L. Ed. 590, and Knickerbocker Insurance Company v. Pen- 
dleton, 115 U. S. 339, 6 Sup. Ct. 74, 29 L. Ed. 432, did not support 
the right to amend. Yet the Suprême Court granted the motion, al- 
lowed the amendment, and reinstated the case on the docket with the 
new plaintiffs in error. 

From the facts of the case of Inland Company v. Toison, we must 
conclude that, where the omitted parties voluntarily appear before the 
appellate court and submit themselves to its jurisdiction, the amend- 
ment will be permitted, even though the time for suing out a writ of 
error or appeal had expired, and even though there is nothing in the 
appeal papers by which the amendment could properly be made. In 
this case, also, the time for taking an appeal had expired before the 
application to amend was presented to this court, and there is noth- 
ing in the appeal papers by which the amendment could be made. It 
is also true, however, that in each appeal the application to amend is 
accompanied by the voluntary appearance of the omitted party in this 
court, and its waiver of citation, and its application to be allowed 
to join in the prosecution of the appeals. We think this case comes 
within the facts of the cases of Inland Company v. Toison, and Gilbert 
V. Hopkins, 198 Eed. 849, 117 C. C. A. 491,_in the Fourth Circuit, and 
Rininger v. Puget Sound Electric Company, 220 Fed. 419, 136 C. C. 
A. 43, from the Ninth Circuit, and is to be distinguished, in the re- 
spect mentioned, from the cases of Estis v. Trabue, Mason v, United 
States, and Dolan v. Jennings, supra, and that the application to amend 
should be allowed, and the motion to dismiss the appeal, if and when 
the amendment is made, be denied. 

[3] Coming to the merits, the case arose out of a collision between 
a dredge of the appellee, the Bowers Southern Dredging Company, and 
a barge, belonging to the Sun Company, named the Pittsburg, and two 
tugboats of the D. W. Ryan Towboat Company, Incorporated, the 



THE MARY B. CUHTI8 13 

Mary B. Curtis and the Ellis. The collision occurred in the Sabine- 
Neches Canal, at the point where it is intersected by the Neches river. 
The dredge was moored to the bank of the canal. The day o£ the col- 
lision being Sunday, no dredging had been done on that day, but some 
incidental work, preparatory to the next week's work, had been done 
on Sunday morning, preceding the time of the collision. The dredge 
was engaged in deepening the channel of the canal for the United States 
government. The channel of the canal, at the point of the collision, 
was about 200 feet wide. The tow and its tugs were proceeding down 
the canal, and had to cross the Neches river before reaching the place 
where the dredge was moored to the bank of the canal. As the tugs 
and their tow approached the Neches river, they signaled the dredge, 
to attract the attention of its crew to the approach of the fleet. After 
attracting the dredge's attention, the évidence tends to show tliat the 
dredge sounded two whistles which the tugs claim was an invitation or 
permission for them to proceed and pass the dredge. Those on the 
dredge claim that one of the tugs gave the two-whistle signal, and that 
the dredge merely answered it with a Hke signal, which was only an ac- 
knowledgment of the tug's notice that it was about to pass. The fleet 
thereupon proceeded down the canal across the river and past the 
dredge. 

The évidence is in hopeless conflict as to the course of the fîeet. The 
évidence of the appellants was to the efïect that the fleet took a cir- 
cuitous course, made necessary by the current and wind, f rom the point 
where it was signaled to pass the dredge ; while that of the appellee, 
the Bowers Southern Dredging Company, is to the efïect that fleet took 
a direct course from that point to the dredge. It is undisputed that 
the proper course to avoid collision with the dredge, and at the same 
time to avoid going ashore in shoal water at the intersection of the 
river and the canal, opposite to where the dredge was moored, was the 
circuitous, and not the direct, course. The évidence is also in sharp 
conflict as to the position of the dredge with référence to the bank of 
the canal to which it was moored. The évidence of the appellants is to 
the efi^ect that the stern of the dredge was 110 feet from the bank of the 
canal, leaving the width of the channel beyond the dredge but 90 feet. 
On the other hand, the évidence of the appellee, the dredge company, 
was to the efïect that prior to the collision, but on the same morning, 
the tug Juno, in charge of the barge Pettibone passed the dredge ii» its 
progress through the canal, and that the dredge, to give the tug and its 
tow ample room for passage, was puUed up close to the bank of the 
canal, to which it was moored, and that it remained in this position, 
hugging the bank, until the collision. 

There was also a dispute as to whether the dredge had a right to oc- 
cupy the position in the canal in which it was moored, in view of the 
f act that it was not engaged in dredging on the day of the collision. As 
the fleet approached the dredge and reached the canal, after having 
crossed the river, it got into shoal water, and this made navigation 
difificult. In order to avoid collision with the dredge, the engines of the 
tug Ellis, the smaller of the two tugs, were. reversed, and, this failing 
to arrest the progress of the fleet towards the dredge, the engines of the 



14 250 FEDERAL REPORTER 

Mary B. Curtis, the larger of the tugs, were then reversed. The Curtis 
being the more powerful tug, the reversai of her engines swung the 
fleet tovvards the dredge, and seems to hâve been the immédiate cause 
of the colHsion. The anchor on the barge Pittsburg was hanging on 
her side at her hawse hole, partly belovv the water line. It v^fas on the 
side of the barge that was towards the dredge, and that struck the 
dredge v^'hen the two coUided. 

It is claimed that the anchor ripped a hole in the side of the dredge 
below the water line, and that the collision between the barge and the 
dredge would hâve been harmless to the latter, but for the présence o£ 
the anchor and its alleged improper position on the side of the barge. 
The contention is that the damage to the dredge was due to the fact 
that it sunk, and that it would not hâve sunk, in spite of the collision, 
but for the position of the anchor on the side of the barge and below 
the water line. The navigation of the fieet was in charge of the cap- 
tain of the tug Mary B. Curtis. The captains of the barge Pittsburg 
and the tug Ellis navigated their vessels in obédience to the directions 
of the captain of the Curtis. 

The foregoing were the ultimate facts of the collision, as they afïect 
the respective liability of the parties to it, the Ryan Towboat Com- 
pany, the Sun Company, and the dredging company. From them the 
District Judge arrived at the conclusion that the dredging company 
was free from fault, and that the Ryan Towboat Company and the 
Sun Company were jointly liable for the collision, their fault being 
mutual. 

The fault charged against the dredging company was (1) in assuming 
unnecessarily a position in the canal where it was a menace to those 
navigating the canal, and (2) in inviting by its signal the fleet to pass 
it while in a dangerous position and by a dangerous method. 

(1) In view of the difficulty with which the dredge was moved, and 
the time and expense incident to moving it, and in view of the shoal 
water in the part of the river adjacent to the entrance of the canal, and 
in view of the fact that there was ample room to navigate the canal> 
if the dredge was properly moored to the bank of the canal, and if the 
vessels navigating the canal did so with proper care, we agrée with 
the District Judge's finding that no fault can be charged against the 
dredge in respect of its position. We also find that the prépondérance 
of the évidence shows that the dredge was moored close to the bank 
at the time of the collision. The évidence shows that it was hauled up 
to the bank at the time the Juno and tow passed, and there is no évi- 
dence that it was moved from this position until after the collision. Its 
position after the collision is satisfactorily explained by the slope of the 
bank and the effect of the collision itself in moving it from the bank. 

(2) The évidence is conflicting as to whether the captain of the 
dredge merely acknowledged the signal given by the fleet of its approach 
and of its intention to pass the dredge, or whether his signal amounted 
to an invitation to do so. If the fleet took the proper and circuitous 
course of approach to and passage by the dredge, no fault could be 
predicated on the giving of the signal, though it was an invitation ta 
pass, since it is clear from the évidence that the fleet, by caref ul navi- 



THE MAKY B. CURTIS 15 

gation, adopting this course, could hâve safely passed the dredge with- 
out mishap. If so, there was no fault in inviting it to do so. The 
fault was in the subséquent unskillful navigation of the fleet in ap- 
proaching and passing the dredge, viz., in permitting the fleet to get in 
shoal water, where navigation was difficult, and in the reversai of the 
engines of the Curtis at a time when the effect was to draw the fleet 
against the dredge. The fault would in that event hâve been solely 
that of the fleet, if the position of the dredge in the canal was not 
fault, and we hâve so determined. 

The other contention is based upon the aspect of the évidence that 
the fleet took the direct course across the river in approaching the 
dredge; that the wind and current made this a dangerous thing to 
do ; that the dredge invited the fleet to approach in this course, know- 
ing of the danger of doing so, and thereby participated in the fault 
that produced the collision. Conceding that the dredge did more than 
recognize the fleet's signal, and in fact invited the fleet to approach 
and pass it, we do not think that fault can be based on such an invi- 
tation for thèse reasons. It does not appear that the invitation directed 
the course to be pursued by the fleet in accepting it, or that the dredge 
had actual or imputed knowledge when it gave the invitation that the 
fleet would act upon it by taking the dangerous course. It is also not 
satisfactorily shown that careful navigation over the direct course 
would not hâve availed to avert the collision, or that the dredge could 
hâve reasonably anticipated that its invitation, carefuUy acted upon by 
the fleet, whatever course it took, would hâve likely resulted in dis- 
aster. That there was unskillful navigation in handling the fleet as 
it passed the dredge, and that it precipitated the collision, is clear. We 
think there is ample ground for a finding that, in the absence of such 
improper navigation, the passage of the fleet over the direct course 
would hâve been so reasonably free f rom danger as not to hâve made 
an invitation to pursue it négligence. 

It must be remembered, in considering this question, that the ofiî- 
cers of the dredge knew that the officers of the fleet were familiar with 
the canal and the position of the dredge in it ; that they knew the width 
of the fleet and its draft, and the width of the channel and its depth, 
and were in a better position to know whether navigation by the direct 
course was safe for a fleet of the width of beam and depth of draft of 
the instant one than the oflicers of the dredge could be. The signal, 
at most, amounted to a permission, and was in no sensé a direction; 
and this is true, though the dredge had the right of way and could 
hâve prevented the passage of the fleet. The fleet had the right to 
pass or anchor, as it saw fit. The dredge did no more than signify its 
willingness for the fleet to pass, if it desired. Whatever might be the 
efifect of an invitation to proceed, when proceeding was fraught with 
imminent danger, known to the person giving the invitation, and un- 
known to the person acting on it, we do not tihink this is such a case. 
The danger under proper navigation was not unreasonably great; it 
was known as well or better to the fleet than to the dredge, and was 
to be acted upon by the fleet only at its option and consequently at 
its péril. 



16 250 FEDERAL EEPOKTEK 

Finding the dredge to hâve been free from fault, we corne to the 
conduct of the officers of the tugs and of the barge. The évidence sat- 
isfactorily establishes the responsibihty of the tugs for the navigation 
of the fleet. The captain of the tug Curtis directed the navigation of 
the fleet, and the captain of the barge Pittsburg navigated the barge 
subject to his orders. The relation between the owners of the tngs 
and the ow^ner of their tow was that of indépendant contracter and 
contractée, and the owners of the tow would not be responsible for 
the neghgence of the tugs' officers in navigating the fleet. Aside from 
the responsibility of the owners of the barge, if any, arising from the 
position of the anchor on the barge, they were under no responsibihty 
to the dredge company for the damage caused by the colHsion. 

We hâve no doubt that the captain of the tug Curtis was neghgent in 
his management of the fleet. If he steered the fleet in the direct course 
across the Neches river to the point at entrance to the canal, where the 
dredge was moored, he was négligent in selecting a dangerous course, 
when a safe one was open to him. If he pursued the circuitous course, 
then it follows that careful navigation of the fleet would hâve enabled 
it to hâve passed the dredge in safety. The dredge being stationary, 
responsibility for the safe passage was presumptively placed upon the 
fleet. The fact of collision, imder such conditions, would prima facie 
impute fault to the moving fleet. The reversai of the engines of the 
Curtis was an act of négligence, and a direct cause of the collision. The 
placing of the tugs abreast of the barge, giving the fleet a width of 
beam of 70 feet, with knowledge that the dredge was to be encountered 
in the narrow channel of the canal, was also a négligent act on the 
part of the person in charge of the navigation of the fleet. Without 
referring to the varions other acts of fault charged against the fleet, 
we think those mentioned are enough to support the decree against the 
D. W. Ryan Towboat Company. 

Coming to consider the liability of the Sun Company, as the owner of 
the barge Pittsburg, we hâve said that its liability, if any exists, dé- 
pends upon whether the position of its anchor, hanging from its side at 
the hawse hole and extending below the water line, was a négligent one. 
This is not a case where the position of the anchor merely aggravated 
in an undefined degree the damage done by the collision, which would 
hâve been the case if the dredge had not sunk, and if the damage had 
consisted of the crushing due to the blow. In this case, the substantial 
damage was due to the sinking of the dredge. If the dredge had been 
struck, but had not sunk, the damage would hâve been inconsequential. 
The substantial damage was the resuit of the sinking of the dredge, 
and the cause of its sinking was the cause of the damage. We think 
the évidence justified the finding of the District Judge that, but for the 
présence of the anchor at the side of the barge and below the water 
line, the dredge would not hâve been sunk by the collision ; and that 
the effect of the position of the anchor was to tear a hole in the side of 
the dredge below the water line, which would not hâve otherwise hap- 
pened from the collision. 

It consequently becomes necessary to inquire whether the présence 
of the anchor in the position described was due to négligence on the 



THE MAEY B. CUKTI3 17 

part of the owners of the barge. The évidence shows that the anchor 
had been carried in that position for two weeks before the colHsion. 
The barge was (hiring that time being navigated up and down the nar- 
row channel of the canal, where colhsions were for that reason at least 
probable, even where due care was exercised, and quite likely to occur, 
where it was wanting. The officers of the barge also knew that the 
dredge was in the canal, and that the barge would necessarily hâve to 
pass and repass it. Under thèse conditions, we think the captain of the 
barge should be held, in the exercise of ordinary care, to hâve reasona- 
bly anticipated the likelihood of damage resulting f rom such a position 
of the anchor, and that the unnecessary carrying of the anchor in a po- 
sition where it might strike a vessel below the water line would be nég- 
ligence on bis part. For this reason, we think that the decree fasten- 
ing a moiety of the responsibility upon the Sun Company as owner of 
the barge was a proper one. It seems reasonably certain that a colli- 
sion, had there been no anchor on the side of the barge^ would not hâve 
caused a sinking of the dredge, and practically ail the damage was the 
resuit of the sinking of the dredge. However, the captain of the Cur- 
tis knew of the position of the anchor on the side of the barge, and 
was not without fault in navigating the fleet with the anchor of the 
barge in an improper position, aside f rom the other fault to be attrib- 
uted to him. 

[4] Complaint is made of the amount of damages awarded the libel- 
ant under the final decree, both because of the method of proof of the 
items constituting it and because of its alleged excessive amount. The 
damages allowed, apart from demurrage and interest, were supposed 
to represent the cost to the libelant of raising and repairing the sunken 
dredge. The items consisted of labor and material. The method of 
proving the items of labor cost is not criticized. Criticism is made of 
the method of proving the cost of materials used for raising and re- 
pairing the dredge, as being by secondary and hearsay évidence. Ac- 
cording to the course of business of libelant, material was purchased 
on order blanks in quadruplicate, and for its gênerai use ; one copy of 
the order going to the seller, and three being retained by the purchaser. 
It was the duty of the employés of the libelant to check the material re- 
ceived against the amount ordered, as shown by the order blank, and 
to distribute the material to the différent jobs for which it vi'as used, 
and to mark the distribution on the order blank. The libelant paid for 
the material on bills of the seller which corresponded with the approv- 
ed order blanks, and the amounts paid were distributed on the books of 
the libelant to the différent jobs, according to the distribution made by 
the employés of the libelant, who received and handled the material. 
First-hand proof was not made of the receipt and actual use of the ma- 
terial, charged to the raising and repair of the sunken dredge, for that 
particular job of work. It is manifest that a requirement of first- 
hand proof of that character for each item of material used in the rais- 
ing and repair of the dredge would be so burdensome and costly as to 
be prohibitive, if it could be produced at ail. We think proof of the 
items, by proof of the usual course of business of libelant, and of their 
correctness according to that course of business, was sufficient as a 
250 F,— 2 



18 250 FEDERAL REPORTER 

prima facie showing, and this character of proof was accompanied by 
proof of experts that the material in amount and kind and value would 
be reasonably needed to accomplish the raising and repairing of the 
dredge. The proof was satisfactory to the master and to the District 
Judge, and we are satisfied, both with the character of proof permit- 
ted by them and with their conclusions as to the aggregate amount of 
the cost of raising and repairing the dredge. 

With référence to the complaint concerning the amount of demur- 
rage allowed the libelant, the évidence of libelant's manager, Crandall, 
was that the monthly rental value of the dredge was from $2,500 to 
$3,000; that of Ryan, the manager of the D. W. Ryan Towboat Com- 
pany, that it was from $1,200 to $1,500. The District Judge allowed 
for demurrage $7,500, $2,500 a month for three months. The award 
was not based upon profit earned by the dredge but upon its rental 
value. It was not allowed for the period the dredge was actually out 
of commission, a period of ten months, but only for the period (three 
months) which the master and the District Judge ascertained from 
the proof was actually necessary for its raising and restoration, if rea- 
sonable expédition had been employed to that end by the libelant. The 
master allowed the lowest amount testified to by the witness Crandall, 
rather than the amount fixed by Ryan, assigning as his reason that 
Crandall showed greater f amiliarity with dredges and their rental val- 
ue than did Ryan, and the District Judge approved this finding. The 
différence between the values fixed by the two witnesses was $1,000. 
We are not willing to disturb the master's conclusion, concurred in by 
the District Judge, in view of their better opportunities to determinei 
as between the two witnesses. 

[5] The master and the District Judge awarded interest upon each 
item from the date of payment until the date of final decree, tiie inter- 
est aggregating $4,210.48. The allowance of interest on the award in 
collision cases, where the libelant is without fault, is discretionary (The 
Itasca [D. C] 117 Fed. 885 ; The North Star, 62 Fed. 71, 10 C. C. A. 
262), though "the gênerai rule of law, or practice, rather is to allow 
interest * * * where the amount of damages is uncertain and is 
matter for proof, from the date when they were liquidated; that is, 
fixed by judicial ascertainment" (Kelley v. City of Cleveland, 176 Fed. 
498, 100 C. C. A. 108). Two circumstances militate against the equity 
of allowing interest in this case prior to the date of final decree. The 
period of repairs was extended over a period of ten months, when the 
proof shows a period of three months should hâve sufiiced. This nec- 
«ssarily postponed the date of the final decree, since the amount of 
damages were not ascertainable until the restoration of the dredge was 
<:ompleted. Again, parts of the dredge were put in better condition 
after the restoration than they were before the collision, since the new 
replaced the old. This advantage inured to the libelant, without cost to 
it, since it was allowed the full cost of replacement. In The Grâce 
Danforth (D. C.) 97 Fed. 978, interest was disallowed because the Dis- 
trict Court found that "the vessel was placed in better condition than 
before the collision." We think the equities of this case require the 
disallowance of interest prior to the date of the final decree. 



THE SKGURANCA 19 

The decree of the District Court is modified, by reducing its total 
amount to $41,481.14, and the amounts of the decrees against the re- 
spective respondents to one-half of that sum, or $20,740.57, and, as so 
modified, is affirmed. 



THE SEGURANCA. 

DIXON V. GEORGE W. HOWE & CO. 

(Circuit Court of Appeals, Flfth Circuit. Februarj' 13, 1918. On Application: 

to Modify Order, lî^eliruary 27, 1918. Reliearing Denied 

Aprll 3, 1918.) 

No. 3127. 

1. Appeal and Error ®=329i — Parties to Appeal — Bringing in bt Amend- 

MKNT. 

Tlie Circuit Court of Avpeals may permit a party, whlch has been 
omitted from an appeal and not summoned and severed, to be brougiit in 
by amendment, where it appears and waives citation. 

2. Principal and Agent <S:=5l69(2) — Chabtee by Agents — Ratification by 

OWNER. 

Tlie owner of a vessel, whicli adopted and carried out a cliarter party, 
and in a suit by the cliarterer based a cross-libel thereon, is bound by its 
ternis, altliough it was originally made by agents wlthout auttiority. 

3. Shipping <Ss=51 — Charters — Collection of Freioht Money — Liability 

OF Vessel. 

The hiaster of a ship, altliough the agent of the owners, is under duty 
to collect freight money for the l)eneflt of a charterer; and where the 
duty exists, both the vessel and owner are liable for his acts or omissions 
in respect to its exercise, and for stronger reason the ship is liable,. 
where the collection is made by the owners themselves. 

4. Shipping ©=5110 — Charters — Liability for Improper Stowaqe. 

Where, as reqnired by the charter, a ship was loaded by stevedores 
employed by the charterer, but "under the supervision of the master," the 
charterer cannot be held liable for improper stowage. 

5. SiiiPPiNG <S=»171 — Charters — Demurrage — Cesser Clause. 

Where ail the terms, conditions, and exceptions of the charter party 
are by récital incorporated in the bills of ladlng sigued by the master, 
the charterer is i>rotected by the cesser clause from liability as to ail 
demurrage incurred after the signing of the bills of ladlng. 

6. Shipping <S=»49(2) — Charters — Mistake in Settlement — Inteeest. 

The owners of a chartered ship held entitled to interest on an amount 
due them from the charterer, but retained by the charterer through a. 
mutual mistalie when the settlement was made. 

Appeal from the District Court of the United States for the East- 
ern District of Louisiana ; Rufus E. Poster, Judge. 

Suit in admiralty by George W. Howe & Co. against the steamship 
Seguranca and Hiram Dixon, master, claimant. Decree for libelant,, 
and claimant appeals. Modified and affirmed. 

J. C. HoUingsworth, of New Orléans, La., for appellant. 
John C. Avery, of Pensacola, Fia., and William Grant and Wro., 
B. Grant, both of New Orléans, La., for appellee. 

igzcsFot otlier cases see same toplc & KEY-NUMBER in ail Key-Numbered Digests & Indexes . 



20 250 FEDERAL REPORTER 

Before WAI^KER and BATTS, Circuit Judges, and GRUBB, Dis- 
trict Judge. 

GRUBB, District Judge. [1] Upon the hearing of this appeal, 
C'ounsel for the appellee directed the court's attention to the fact 
that the National Surety Company, surety on the stipulation for the 
release of the Seguranca, which was seized under the libel, and 
which was a party respondent in the final decree rendered in the 
District Court jointly against the claimant and itself, was not made 
a party to the appeal, that there had not been a summons and sev- 
erance as to it, and that it had not been notified of the appeal. On 
the authority of The Bylands, 231 Fed. 101, 145 C. C. A. 289, and 
of Estes V. Trabue, 128 U. S. 225, 9 Sup. Ct. 58, 32 E. Ed. 
437, it is suggested that it is our duty to dismiss the appeal, of our 
own motion, for want of jurisdiction of the necessary parties to the 
appeal. The appellant resists this motion, and has applied for leave 
to amend his pétition for an appeal and the citation, by making the Na- 
tional Surety Company a party to the appeal, and has accompanied his 
application with the voluntary appearance of the National Surety 
Company, and a waiver of service of citation, and a joinder in the 
appeal. In accordance with our ruling in the case of The Mary B. 
Curtis, 250 Fed. 9, decided at this term, and for the reasons tiiere 
given, we will allow the amendment of the appeal by the making of the 
National Surety Company a party to it, and, the amendment being con- 
sidered made, asprayed for, the appeal will be allowed to stand for dé- 
cision upon the merits. 

The first contention of the appellant is that the District Court had 
no jurisdiction to proceed in rem, because (1) there was no charter 
party between the owners of the Seguranca and the libelants, on which 
to base the ship's liability ; and (2) because the cause of action, if any 
existed, was a personal one against the owners, and not the proper 
foundation for a proceeding in rem. 

[2] The real cause of action of libelant was for freight money col- 
lected by the shipowners from a consignée at destination, which was 
the property of the charterers of the ship, and was received for the 
use of the charterer and not turned over to them. The original libel 
had attached to it as an exhibit what purported to be a copy of the 
charter party, on which the libel proceeded. As a matter of fact, how- 
ever, the copy attached to the libel was not that of charter party be- 
tween libelant and respondents, but of one between respondents and 
Allen and Friedrichs, who are not parties to the libel. The facts were 
that the ship was originally chartered by the respondents to Allen and 
Friedrichs for a certain amount, and was thereafter again chartered 
to libelant for an increased amount. The second charter party was 
signed, on behalf of the owners, by Allen and Friedrichs, as agents. 
Their authority to act for the owners is disputed. 

We find it unnecessary to détermine whether Allen and Friedrichs 
originally had authority to sign the charter party on behalf of the 
owners. The record abundantly shows that the owners ratified the 
second charter party with appellee, both in correspondence prior to 



THE SEGUKANCA 21 

the filing of the libel and by their conduct in the proceeding itself. In 
paragraph 3 of their original answer they deny the allégations of ar- 
ticle third of the libel, "except the averment by libelant that a charter 
party was entered into between the libelant and the steamship Segur- 
anca of date May 28, 1915, presently objecting to any and ail aver- 
ment of the contents thereof, and the said parties will object to any 
other proof than the document itself." The original document was 
introduced in évidence on the hearing on March 28, 1916. The appe- 
lant, as claimant of the steamship Seguranca, filed a cross-libel against 
libelant, relying in it upon rights claimed to hâve been given him 
by "the charter party averred in the original libel, and the basis of the 
said libel by paragraph three thereof," and asking affirmative relief 
based upon provisions of said charter party, and asking that libelant 
be required to furnish a bond to respond to the cross-libel under ad- 
miralty rule 53 (29 Sup. Ct. xlv), and that proceedings under the orig- 
inal libel be stayed until such security was given. 

By expressly admitting in his answer the exécution of a charter 
party between appellant and appellee of like date as the one sued on, 
and by relying upon it as a basis for relief in the cross-libel, we think 
the appellant is concluded from disputing that the second charter 
party was binding on him and the ship, whatever may hâve been the 
original incapacity of Allen and Friedrichs to exécute it as agents for 
the owners. This would be true, even though, as appears to hâve been 
the case, the original charter party was between the owners and Allen 
and Friedrichs, and at a lower rate of freight, and the charter party 
on which the libel is based was in its inception a contract between Al- 
len and Friedrichs and appellee at a higher rate of freight. Its sub- 
séquent adoption by the owners of the Seguranca justified the libel 
against them based on it. 

[3] The appellant also contends that, conceding the charter party 
to be binding on appellant, the liability sought to be enforced by the 
libel was a personal one against the owners, and would not sustain a 
proceeding in rem against the Seguranca. The lack of authority in 
the master to exécute the m^aster's five days' note may be conceded, 
and still the libel may be sustained in rem. The master, though he 
may be the agent of the owner, is under a duty to collect freight 
money for the benefit of the charterer, and where the duty exists, his 
owners are liable for his acts or omissions in respect to its exercise. 
Parsons, Shipping and Admiralty, vol. 2, § 28; The Port Adélaïde 
(D. C.) 59 Fed. 174; Id., 62 Fed. 486; The Maiden City (D. C.) 33 
Fed. 715. The master, therefore, had implied authority to bind the 
owners and the ship in the matter of collection of freight money, due 
the charterers. 

In this case, the owners of the Seguranca themselves made the col- 
lection) of the freight money due the charterers on the consignment of 
the Pensacola Lumber & Timber Company, and the master's author- 
ity is not involved. If the act or omission of the master, when he has 
authority to collect freight money belonging to the charterer, is bind- 
ing on the owners and on the ship in a proceeding in rem (as was held 
in the cases cited), surely the liability of the owners for the making 



22 2S0 FEDERAL REPORTEE 

of such collections and refusing to account to the charterer therefor, 
can also be enforced in a proceeding in rem against the ship. It is 
conceded that the owners coUected the freight money due the charter- 
ers on the consignment of the Pensacola Lumber & Timber Company 
on arrivai of the Seguranca at destination, and still withhold the same. 

The only possible answer to the liability of the ship for the amount 
so withheld, as we view it, would be the existence of a valid offset in 
favor of the owners. The plea of estoppel is without merit, in view of 
the réservation in favor of appellee, expressed in terms in the agree- 
ment on which it is based. 

[4] The appellant claimed as an offset damage alleged to hâve 
been sufïered by him because of improper loading of the Seguranca 
by the stevedores employed by the appellee as charterer, consisting in 
the expense of removal of part of the cargo and loss of revenue, claim- 
ed to hâve been due to shortage of cargo due to improper loading. The 
évidence is conflicting as to whether the admitted tenderness of the ship 
after it was loaded was due to improper stowage of the cargo or to 
the alleged crankiness of the ship herself . We find it unnecessary to dé- 
termine as between thèse causes. Section 15 of the charter party pro- 
vided that: 

"The charterers or thelr agents shall provide and pay a stevedore to dO' 
the stowlng of the cargo under the supervision of the master." 

One Tracy was employed by the charterer to do the loading. Hi&~ 
testimony is to the effect that the loading was done in a manner known^ 
to and approved by the master, and that additional cargo of resin, a 
subject of complaint by the appellant, was put on the ship only after 
the intention to do so was made known by Tracy to the master, and- 
that the master made no objection, until after it was loaded on the 
ship, and that the first objection or protest made by the master was 
after the ship was loaded and when a list became apparent. It is true- 
that the évidence of the master, Dixon, is partly in conflict with 
Tracy's. The District Judge, after hearing the évidence of both, 
came to the conclusion that any improper stowing of cargo was due to 
the joint fault of the stevedore, Tracy, and the master, Dixon, and 
under the terms of the charter party, it was made the master's duty to- 
supervise the stowing of the cargo. Under thèse circumstances, we- 
agrée with the conclusion reached in the District Court that the appel- 
lant should take nothing by reason of this offset. 

[5] The offset based on demurrage, claimed for delay in unloading 
at destination, is covered by cesser clause of the charter party, which 
provides : 

Sec. 20. "Charterers' responsibillty under this charter shall cease as soort 
as the cargo is shipped and bills of lading slgned, provlded ail the condi- 
tions called for in this charter hâve been fulfilled or provided for by bUls of 
lading." 

The bills of lading provided that ; 

"Ail the terms, provisions, and exceptions [of the charter] are fierewltb In- 
corporated and foj'm a part hereof." 



THE SEGUEANOA 23 

The bills of ladîng making équivalent provision -with the charter for 
the owner's security, the cesser clause became fuUy operative in favor 
of the charterer as to ail demurrage incurred after the signing of the 
bills of lading. 

[6] In the adjustment between the charterer and the master at 
Pensacola, before the ship sailed, through a mistake in rate of ex- 
change, the master for the owners received $677.50 less than the own- 
ers were entitled to. The District Judge allowed this to appellant as 
an offset, but denied the appellant interest on it from the time of 
settlement. The District Judge allowed the appellees interest on the 
amount of freight money held back by the owners. "The allowance of 
interest by way of damages in cases of collision, and other cases of 
pure damage, * * * is in the discrétion of the court." The Scot- 
land, 118 U. S. 507, 6 Sup. Ct. 1174, 30 h. Ed. 153. The claim of 
appellant for the recovery of the $677.50 was not in the nature of a 
recovery of pure damage. It was money retained by mutual mistake by 
the charterer, and the remedy for its recovery would be in the nature 
of an action for money had and received by the charterer for the use 
of the owners, which is in its nature a contractual liability. In view of 
this fact, we think that the amount should bear interest from the time 
it should hâve been paid. As the District Court allowed interest in 
favor of the appellees on the principal claim, we think interest should 
hâve been allowed the appellant on the offset, from the date of settle- 
ment in Pensacola to the date of final decree. 

In this respect, the decree of the District Court is modified, and, as 
so modified, is affirmed. 

On Application to Modify Order. 

PER CURIAM. This cause coming on to be heard upon the appli- 
cation of the appellee to modify the former order of this court, modi- 
fying and affirming the decree of the District Court, and adjudging 
that appellant hâve and recover of the appellee the cost of the appeal, 
by disallowing the appellant any costs of appeal, and it being made 
to appear that the appellant and cross-libelant recovered upon his 
appeal less than the sum or value of $300, exclusive of costs: 

It is ordered that the former order of this court be modified, and 
that the decree of the District Court, as modified by said former order 
of this court, be affirmed, but that the appellant and cross-libelant re- 
cover no costs, but is adjudged to pay the costs of appeal, for which 
•exécution may issue. 



24 250 FEDERAL REPOBTEK 

SPENCKR V. BABYLON R. CO. et al. 
(Circuit Court of Appeals, Second Circuit. February 13, 1918.) 

No. isa. 

1. Appeal and Ereob <S=5l61— Rioht of Revibw — Estoppei, bt Acceptance 

OF Benefits. 

Uiiless tliere is a separable controversy, or unless tliere is some sum 
to wlilch a party is entitled in any event, he may not aceept the benefit 
of a decreo and later appeal. 

2. Receivebs <S=i146 — Redelivery of Property — Kffect. 

An order directing tlie receiver of a corporation to restore tlie property 
to tlie coriioration, subject only to the right to issue receivev'.s certlfleates 
to pay taxes and other expense.s incurred by him, wliieli was carried into 
effect, divested tlie court of jurisdiction over the property and of the power 
to ad.ludicate upon the validity of taxes thereafter assessed and levied 
thereon. 

3. CouiîTs ®=»282(1) — JuMSDicïiox of Fedebal Courts — Review of Assess- 

ment. 

Where a state by constitutional statutes has established tribunals vested 
with exclusive power to malce assessnients, and provided eertiorari to tha 
State courts for review of their actions and for relief against overvaluation 
and inequality of assessment, a fédéral court is without jurisdiction to 
review such an assessment collaterally and to reassess the property, not 
at least in a case where the plalntitï lias not exhausted the judicial remé- 
dies so provided. 

4. Taxation ©=843 — Penalties for Nonpayment op Tax — Persons Liabi.e 

FOR Penalïies. 

Where a corporation unsuccessfully contests the validity of taxes on 
Its property until after they are due and payable, it is subject to the 
statutory Interest and penalties for nonpayment. 

Appeal from the District Court of the United States for the East- 
ern District of New York. 

Suit in equity by William B. Spencer against the Babylon Railroad 
Company. Cross-appeals by Henry Tuthill, as County Treasurer, and 
Arthur Carter Hume, receiver of défendant, from certain orders. Re- 
ceiver's appeal dismissed in part, and ordçrs affirmed in part. County 
Treasurer's appeal dismissed. 

See, also, 233 Ked. 803. 

This case cornes up on two cross-appeals — the first, an appeal by Henry P. 
Tuthill, as county treasurer of Suffolk county, from two decrees herein entered 
May 8, 1917, by the District Court for the lîastern District of New York ; the 
other, by Arthur C. Huine, as receiver of the Babylon Railroad Company, from 
the same decrees. Tlie record does not deflnitely state the nature of the origi- 
nal suit, but it seems to bave beeri the usual bill of séquestration, brought by a 
créditer of the défendant corporation for tiie appointment of a receiver and 
the distribution of the assets of the défendant against dissipation and waste 
througli exécutions, attachments, and other légal pr<x;ess of the court. Paul T. 
Brady and Willard V. King were appointed receivers of the property on the 
20th day of January, 1911, and Ralph J. Hawkins was substltuted in thelr 
place on February 15, 1913. On the 24th of October, 1913, the receiver iiled his 
accounts up to September 30, 1913, in which he showed accrued taxes levied 
upon the défendant amounting to the sum of $5,828.27. On the 12th of De- 
cember, 1913, the court passed an order directing the receiver to turn back to 
the défendant ail its property, subject to the right of the receiver to Issue 

(gssFor other cases see same topio & KBY-NUMDER in ail Key-Numbered Digests & Indexes 



SPENCER V, BABYLON R. CO. 25 

]-nn('iver's cpi'tiflcates covering the property in amount svifflcient to pay the re- 
fplver's c-ompraisalion and ail debts and liabilitios ineurred by Mm as such. 
On the 13th of Deeember, 1913, the property was so dolivered to the offlcers of 
the défendant, vvho bave been operating the same since that time. On the 
27th of February, 1914, the court passcd an order anthorizing the receiver to 
sell receiver's eertitieates for the face value of ijîlO.OlO.Sl, the proceeds of the 
same to be nsed in part for the purpose of paying the taxes due and shown by 
the report of the receiver, Hawkins, as afm-esald. 

Hawliins falled to dispose of the receiver's eertitieates within the 60 days 
required by the order, and on the 12th of May, 191-1, he obtained an order 
directing the défendant to show cause why he should net be given further au- 
thority to sell them, or again to take into his custody the property of the 
défendant. This hearing was adjourned from time to time until September 9, 
1914. Meauwbile, and on the 24th of July, 1914, the village of Babylon pub- 
iished a notice of sale of the défendants property for the arreaçs of taxes, at 
public auction, for the 15th day of August, 1914. The taxes for wliich the 
sale was to he had covered the years 1910, 1911, 1912, 191.'5, and 1914, and 
amounted to Ç84fi.03. On the 7th day of August, 1914, the défendant procured 
an order from the District Court directing the authorities of the village of 
Babylon to show cause why this sale should not be stayed, and this proceeding 
was adjourned until September 9, 1914, upon condition that the taxes for the 
years 1910 and 1011 should be paid, and they were so paid on the 27th of 
August, 1914, to the amount of .'};305.79. When this last proceeding, together 
with the receiver's proceeding, came on for a hearing, on September 9, 1914^ 
the matter was again adjourned until tlie 16th of October, 3914, when the 
court grauted a permanent injunction against the village of Babylon, forbidding 
any sale for taxes levied for the years 1912 and 1913, but for some reason un- 
disclosed no order was ever (^ntered ou this décision. 

This being the posture of the case on January 13, 1915, the District Court 
signed an order to show cause against the villages of Babylon and Amityville, 
and the town of Babylon, and the county treasurer of Suft'olk county, for a 
permanent injunctiou restraining them from selling the property of the de- 
fendant for any taxes during the years 1910, 1911, 1912, 1913, and 1914. This 
application was niade upon atfidavits by the président of the défendant and 
its anditor. The basis of the application was that the défendant had dis- 
covered that the taxes for the years in question wcre imjiroperly levied, ex- 
cessive in amount, and not valid liens against the property of the défendant, 
and that the receivers of the company never took any steps to review such 
taxes or assessmcnts or to reduce them. The matter remained undeeided, and 
on October 16, 1915, the county treasurer of Suffolk flled a notice of motion al- 
leging tiuit upon the final hearing he would pray for an order declaring that 
the taxes set fortli in certain earller answering attidavits of Tuthill and 
Leslie be adjudged to be valid liens upon the property of the railroad company, 
entitled to Immédiate paynient, and for an order directing sale. On Novem- 
ber 5, 1915, and following, testimony was taken upon the validity and 
amount of the taxes in question, and finally, on May 18, 1916, the court filed 
an opinion (233 Fed. 803) fixing the fair valuation of tlie spécial francliise 
taxes for each year up to tlio year 1915 at ?23,000. Thèse franchise taxes were 
substantially the only taxes contested between the parties. This opinion was 
followed on the 12th day of July, 1916, by an order of the court fixing tlie 
value of the privato property at a stated sum per mile and the total value of 
the spécial fi-anchise at $23,000. This order was based upon a reassessment 
of the property, in disregard and correction of the assessments of tlie New 
York State board of tax coramissioners, and included the years 1910 to 1914, 
inclusive. 

There ensued a number of complicated pi'oceedings looking to the enforce- 
ment of this order, among them an application by Tuthill, county treasurer, 
asking that tbe taxes of 1915 be likewise included upon the same terms. 
Eventually the court, at the instance of the présent receiver, Hume, undortook 
to correct certain errors in the order of .Tuly 12, 1916, and to submit the taxes 
of 1915 and 1916 to the same reassessment. To this end eventually two orders 



26 250 FEDERAL REPORTER 

were entered on May S, 1917, which are those appealed from. Thèse orders 
together fixed the equalized assessraent of the spécial franchise assessments 
at 60 per cent, of $23,000, or $13,800, and included the taxes of 1915 and 
1910. In respect of thèse tvvo changes the county treasurer novv complains,. 
being satisfled with the order of July 12, 1916. The county treasurer received 
the payments required by thèse orders on May 17, 1917, and on May 21, 1917, 
took an appeal from eaeh. The appeal of the receiver was taken later. The 
receiver tlien nioved to dismlss the appeal of the county treasurer, on the 
ground that by receiving payment In full under the orders of May 8, 1917, he 
had waived any right to appeal. Upon his own appeal he urged only three 
points: First, that there was no ground for any assessment for spécial fran- 
chise ; second, that certain taxes on the private rights of way were illegally 
levled on the face of the roU, beeause not proi>erly dlstributed between dis- 
tricts ; third, that no interest or penaltles shouid hâve been allowed against 
the défendant. 

Arthur Carter Hume, of New York City, for appellant Hume. 
Percy L. Housel, of Riverhead, N. Y., for appellant Tuthill. 

Before WARD and FIOUGH, Circuit Judges, and LEARNED 
HAND, District Judge. 

LEARNED HAND, District Judge (af ter stating the facts as above). 
[ 1 ] The appeal of the county treasurer must be dismissed. The gên- 
erai rule is well settled that unless there is a separable controversy, 
or unless there is some sum to which the appealing party is entitled in 
any event, he may not accept the benefit of the decree and later ap- 
peal. Chase v. Driver, 92 Fed. 780, 34 C. C. A. 668; Albright v. 
Oyster, 60 Eed. 644, 9 C. C. A. 173. There was hère no separable con- 
troversy, such as existed in Goepel v. Kurtz, 216 N. Y. 343, 110 N. E. 
769, Carson L. Co. v. St. Louis & S- F. R. Co., 209 Fed. 191, 126 C. 
C. A. 139, and Snow v. Haziewood, 179 Fed. 182, 102 C. C. A. 448, for 
the whole claim turned upon the proper amount of the assessment for 
spécial franchises. Nor was there any sum concededly due to the 
county treasurer, since the receiver contended from the outset that 
there was no basis for any spécial franchise tax whatever. Indeed, if 
the receiver shouid hâve succeeded in his contention below or in this 
court, the county treasurer would hâve to restore the payment which 
he has already collected. Nor do we think that the provision in the 
opinion, not the decree, covered this question, assuming that the court 
below could afifect the right to appeal in any way, a point we do not 
décide. The opinion only provided that an appeal by the municipal 
authorities shouid not stay their rights to collect their taxes. What ef- 
f ect the collection of the taxes shouid hâve upon the right to appeal was 
a very différent matter, and one which the District Court did not at- 
tempt to détermine whatever its power. Indeed, the whole point is 
irrelevant, as the opinion of the court is not a part of the decree, and 
the provisions of the decree touching appeals has nothing to do with 
the question. 

[2] Corning, now, to the appeal of the receiver, we think that the 
whole proceedings to review the assessments were in fact without ju- 
risdiction, and that they shouid not bave been attempted over the ob- 
jection of the county treasurer. As to the taxes of 1915 and 1916, 
they were assessed after the time when the custody of the res had 



SPENCER V. BABYLON R. CO. 27 

passed from the District Court (the assessment and probably tlie levy 
for 1914 was before December 13, 1913). Assiiming, as we may, that 
that court had the right, after December 13, 1913, to reserve the is- 
suance of receiver's certificates to pay for assessments for taxes and 
other receiver's expenses incurred during pendency of the receivership, 
and even assuming that as an incident to that réservation it had the 
power to enjoin the assertion of thèse taxes in so far as it might be 
necessary to a complète disposai of the controversy, nevertheless the 
réservation could not extend beyond those matters which were left 
undecided at the time the court lost custody and none of the subséquent 
taxes under any construction lay within the further pwwer of the court. 
We do not agrée that, having lost custody, the court could reserve a 
gênerai jurisdiction under a reserved power to résume possession at 
some future time. 

[3] We think, moreover, that the District Court was also without 
jurisdiction in its review of the assessments for spécial franchises for 
the years 1910-1914. Under the statute of New York the power to 
assess spécial franchises is vested in the state board of tax commis- 
sioners, an officiai body with sole jurisdiction for that purpose. New 
York Tax Law (Consoï. Laws, c. 60) §§ 43, 44, 45. An adéquate means 
of review of their assessment is provided in that statute by certiorari 
in the Suprême Court of the state, under section 46. Now there was 
no question in the case at bar of the jurisdiction of the state board of 
tax examiners, or of any irregularity in the assessment, levy, or" ex- 
tension on the rolls by which the tax was imposed. The law of New 
York gives an assessment once made with jurisdiction the force of a 
judgment which cannot be collaterally attacked. Swift v. Pough- 
keepsie, 37 N. Y. 511; U. S. Trust Co. v. New York, 144 N. Y. 488, 
39 N. E. 383. No error as to the actual value of the property assessed 
is open for reconsideration (People ex rel. Insurance Co. v. Coleman, 
107 N. Y. 541, 14 N. E. 431 ; New York v. Chase, etc., Co., 206 N. Y. 
3, 99 N. E. 143), though this limitation does not, of course, apply any 
more than in the case of a judgment, if the assessors had no jurisdic- 
tion (Bruecher v. Portchester, 101 N. Y. 240, 4 N. E. 272). Article 13 
of the Tax Eaw (sections 290-294) gives full relief against overvalua- 
tion and inequality of assessment, and it is through it alone that the 
assessment may be assailed. The state of New York having the pow- 
er, subject, of course, to constitutional limitations, to levy its taxes by 
such officers as it sees fît, no court may set aside the acts of the as- 
sessors and reassess the property, since that is not a judicial act, and 
a judge bas no more power to do it than a layman, whether the ques- 
tion arise at law or in equity. 

The only ground for the exercise of such a power is as an incident 
to the right to set aside the assessment as unconstitutional. This the 
Suprême Court, in Raymond v. Chicago Union Traction Co., 207 U. S. 
20, 28 Sup. Ct. 7, 52 L. Ed. 78, 12 Ann. Cas. 757, and Greene v. 
Louisville & Interurban R. R. Co., 244 U. S. 499, 37 Sup. Ct. 673, 
61 L. Ed. 1280, Ann. Cas. 1917E, 88, did, holding that an assessment 
may be reopened, and furthermore that the property may in effect be 
reassessed, by compelling the plaintiff to consent to a fair assessment 



28 250 FEDERAL REPORTER 

upon its property. Thèse cases, however, both proceed upon the as- 
sumption that the arbitrary and discriminating action of the assessors 
was in violation of the Fourteenth Amendment. They each arose on 
independent bill in equity, explicitly laid upon the violation of the Unit- 
ed States Constitution, and we do not read them as indicating that an 
assessment regularly made may be reviewed upon the mère allégation 
that the assessment was erroneous, even though the error proceeded 
from a deliberate effort to overvalue the plaintiff's property, which 
might properly be deemed a fraud. In the case at bar there was no 
suggestion of any unconstitutional conduct of the state board of tax 
commissioners, nor indeed the least ground for such an assertion. At 
most the facts justified an error in the way in which the assessment 
was made. 

Moreover, in each of the cases cited there were no means provided 
in the state statute by which the action of the assessors could be ju- 
dicially reviewed as can be done in New York by certiorari. Now it 
is true that the Suprême Court mentioned this fact only upon the ques- 
tion of the plaintiff's right to équitable relief, but we think that the 
distinction may be taken as going deeper. While there may be uncon- 
stitutional discrimination merely through their administration of a val- 
id statute by officiais, the action prohibited by the Fourteenth Amend- 
ment must be that of the state, and it cannot be said, at least under 
ordinary circumstances (Ex parte Royall, 117 U. S. 241, 6 Sup. Ct. 
734; 29 h. Ed. 868), when the state has itself provided means for the 
correction of just such miscarriages, that the initial action of its offi- 
ciais is its own until the final resuit has confirmed it and made idle 
further appeal to the state authorities. Therefore we should be slow, 
if the receiver or the défendant had indeed based its claim upon the 
Fourteenth Amendment, to admit any jurisdiction to review an as- 
sessment in the face of section 46 of the New York Tax Law. 

What we hâve said about the assessment of the spécial franchises 
applied equally to the equalization, since under section 4Sa, subdivisions 
1 and 2 (as added by Laws 1911, c. 804), prior to 1916, the state board 
was itself to equalize the assessment, and the supervisors must enter 
that sum upon the rolls. As equalizer the state board was as exeinpt 
from judicial review as it was as assessor. In so far, therefore, as the 
District Court attempted any review of the spécial franchise assess- 
ments as fixed, and necessarily as equalized, by the state board of tax 
commissioners, we think that it exceeded its jurisdiction. This point 
the county treasurer raised originally, and could certainly raise it 
hère, if bis appeal were before us. Upon the receiver's appeal we think 
the point is still open, because the question is not one which the con- 
sent of the parties can cure; rather it goes to the assertion of a ju- 
risdiction over a subject-matter which under thèse circumstances the 
District Court did not and could not exercise. 

We may assume that it was open to the District Court to correct any 
erroi's upon the face of the rolls, taking the assessments as they stood 
as to the taxes before 1915, and that the court had jurisdiction to that 
end. However, aside from the correction of the assessment, the re- 
ceiver raises no question of the orders of May 8, 1917, except tlie 



SI ENCER V. BABYLON E. CO. 29 

validity of the taxes on the private right of way for 1912, and the pen- 
alties and interest charges. As to the objection to the regularity of the 
private right of way taxes for 1912, we find upon the assessment rolls 
for that year the apportionment of the assessments between the sev- 
eral school districts (page 33). The apportionment of the spécial fran- 
chise tax was made by an independent certificate. This apportionment 
of the private right of way assessment upon the roll itself seems to us 
to hâve been sufficient under the amendment to section 40 of the Tax 
Law passed in 1912 (Laws 1912, c. 271). It is true that no certificate 
as required to section 40 appears in the record, but we assume that 
the assessment rolls were signed as a whole and when the prescribed 
apportionment was made upon the roll itself the gênerai certificate was 
sufficient. 

[4] There remains only the question of penalties and interest. The 
order of July 12, 1916, allowed only interest upon the taxes as reas- 
sessed, but the modified order of May 8, 1917, changed this by allowing 
the statutory penalties and the interest. We see no reason why the 
penalties and interest should not hâve been allowed upon the taxes on 
both private rights of way and spécial franchises. The court had ju- 
risdiction to reassess neither, and the amounts remained as fixed on 
the rolls. The défendant litigated their validity at its péril. The pow- 
er of the District Court was limited to declaring void such taxes as 
were levied without jurisdiction, and perhaps such as were illégal upon 
the face of the rolls. It was therefore inévitable that penalties and 
interest should hâve been allowed. As to the 5 per cent, penalty, this, 
it is true, depended, under section 73 of the Tax L,aw, upon a notice 
from the county treasurer to the collector of taxes ; but we are to 
présume that the authorities did those things rightly which should hâve 
been donc, and that after the taxes had been levied and remained un- 
paid for 30 days the notice was given. 

In disposing of the cause we must dismiss the receiver's appeal in 
respect of those assignments of error which raise matters over which 
the District Court had no jurisdiction. We can neither affirm nor re- 
verse the orders in thèse respects, and yet the case is not one under 
section 5 of the Act of March 3, 1875 (18 Stat. 472, c. 137 [Comp. St. 
1916, § 1019]), where we must dismiss the whole proceedings, since 
the court had jurisdiction to consider the validity of the taxes in some 
respects. We might, it is true, vacate the injunction and restore the 
taxes to the original sums upon the assessment rolls ; but that we could 
do only upon the county treasurer's appeal, which is not before us. 
In such respects as the District Court had jurisdiction, we affirm the 
orders. 

Therefore we dismiss the receiver's appeal upon his f ourth and fif th 
assignments of error, and we affirm the orders upon the first, second, 
third, and sixth assignments of errors. W^e dismiss the county treas- 
urer's appeal. The orders of May 8, 1917, will therefore stand, but 
their efl:ect upon the rights of the parties, in any collatéral proceedings 
in other courts, we do not assume to consider. 



30 250 FEDERAL HEPOETER 

CAR SON et al. v. HURT. 

(Circuit Court of Appeals, Fiftli Circuit. Marcli 16, 1918.) 

No, 3126. 

1. MORTGAGES <©=»310 — PAETIAL REI.E A.SE— I NTEREST. 

Where a veiidor took a deed of trust for the unpaid purchase money, 
which provided tliat tlie purcliaser, liîs lieirs or assigns, might obtain the 
release of portions of the land upon payment of the amount due thereon 
as prorated, the grantees of the purchaser, who delayed In demandlng 
releases, are llable for the luterest accruing during the perlod of delay, 
and cannot obtain releases on payment merely of the amount origlnally 
due. 

2. MoBTGAGEs ®=»310 — Partial Release. 

In the absence of any provision to the contrary, a mortgagee can gra- 
tuitously release any of the land mortgaged without impairing his right 
to enforce the mortgage agalnst land not released ; hence, where a deed 
of trust for unpaid purchase money provided for the release of portions 
on payment of the amount due thereon as prorated, the fact that the 
vendor released some portions of the land on différent terms does not 
deprive him of the right to demand the full amount due on other parcels. 

3. MOBTGAGES <S=5581(2) — roRECLOSDEE — ^AtTOBNEY'S FeES. 

Where notes for unpaid purchase money due on land and secured by 
a deed of trust provided for the payment of an attorney's fee, If placed 
in the hands of an attorney or collected by suit, grantees of the pur- 
chaser, who made no tender before foreclosure suit of the amounts 
wliich they were required to pay to secure the release of their lands un- 
der the trust deed, are llable for the attorney's fee provided. 

4. Appeai. and Ereor <g=>907(4) — Review — Pkesumptiok — Evidence. 

Where the court did not approve the statement of the évidence found 
in the record, as required by equity rule 75 (198 Fed. xl, 115 C. C. A. xl), 
but it Is certified by eounsel to be correct, but It does not shovy that ail 
évidence or substance thereof is therein contaiiied, it is to be presumed 
that the eourt's fiudings were supported by évidence other than that 
which the record disclosed, though couusel had approved the statement of 
the évidence as correct. 
6. Appeal and Ebbor 'S=al073(l) — Revebsal — Complète Détermination. 

Where three of the défendants to a suit to foreclose a deed of trust 
flled a cross-bill to remove a cloud from their title, and the sole de- 
fendant to sueh cross-bill disclaimed any interest and consented to the 
entry of any decree desired, the failure of the court to dispose of the 
cross-bill, which did not appear to hâve been called to its attention, does 
Bot warrant reversai of a decree of foreclosure. 

6. MoRTGAGES <g:=»579 — Foreclosure — ^Decree— Modiitication on Appeal. 

Where a vendor, who took back a deed of trust for the unpaid purchase 
price, providing that the purchaser or his heirs or assigns might obtain 
reiîases for any parcels not less than 640 acres upon payment of the 
amount due thereon as prorated, foreclosed thei deed of trust against 
unreleased lands, which had been disposed of, a modification of the 
decree on appeal, consented to by the vendor, so as to permit each de- 
fendant, by paying a sum bearing the same porportion to the amount 
decreed that his land might bear to tlie larger parcel foreclosed, to pre- 
vent the sale of his land, is proper. 

Batts, Circuit Judge, dissenting in part. 

Appeal from the District Court of the United States for the North- 
ern District of Texas ; Edward R. Meek, Judge. 

®=s>For other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes 



CAESON V. HURT 31 

Bill by William Hurt against John Carson and others. From a de- 
cree for complainant, défendants appeal. Modified and affirmed. 

Burt J. Thompson and Alan Loth, both of Forest City, lowa, and F. 
M. Ryburn and S. H. Madden, both of Amarillo, Tex., for appellants. 
Ben H. Stone, of Amarillo, Tex., for appellee. 

Before WALKER and BATTS, Circuit Judges, and POSTER, Dis- 
trict Judge. 

WALKER, Circuit Judge. By a deed bearing date December 3, 
1906, the appellee, William Hurt, sold and conveyed to W. H. Garrett 
85,844.95 acres of land in Texas at the price of $343,379.80, of which 
$50,000 was paid in cash, $106,058.80 was to be paid to the holders of 
a lien on ail the land, to which appellee's title was subordinate, the debt 
secured by that lien being assumed by appellee's vendee, and $181,321, 
evidenced by the vendee's 10 notes, was secured by a vendor's lien and 
by the vendee's deed of trust covering the land sold. This was a suit 
by Hurt to foreclose the liens in bis favor on the part of the land cov- 
ered thereby which had not been released before the suit was brought. 
Twelve défendants, each of whom acquired part of the unreleased land 
with constructive notice of the above-mentioned Hens, appeal from a 
decree in favor of Hurt, which adjudged $78,935.23 to be the amount 
due to him on the purchase-money notes, and decreed the foreclosure 
and sale of the unreleased land. 

[1] The deed of trust to the appellee contained the foUowing pro- 
vision : 

"Thls conveyance in trust Is made with the express agreement and under- 
standing that a full release of this trust, as well as a full release of the ven- 
dor's lien, will be executed and delivered to the'.said W. H. Garrett, his heirs 
or assigns, as to any quantity or parcel of land enibraced in tliis convey- 
ance not less than 640 acres upon payment of such part of the entire unpaid 
purchase money as is prorated, owing and unpaid on the land for which such 
release may be demauded." 

An évident purpose of this provision was to' enable the purchaser, 
or any one who might succeed him in ownership, to subdivide the land 
and sell parcels of it freed of the liens on the whole. The language of 
the provision gave notice to any subséquent purchaser of a part of the 
land that the existence of the right to bave such part released fronr 
the liens on the whole was dépendent upon the payment of a pro rata 
part of the entire unpaid purchase money, including as well what was 
payable to the appellee's lien creditors as what was payable to himself . 
When the appellants made their several purchases, not long after the 
appellee's sale and conveyance, they had constructive notice of what 
was required to be done to clear the land they bought of the liens cov- 
ering that and other land. No one of the appellants undertook to com- 
ply with the provision quoted until years after his purchase was made. 
That provision may be regarded as an ofïer by the appellee to subsé- 
quent purchasers of subdivisions of not less than 640 acres of the tract 
sold to release such subdivisions from the liens in favor of the appellee 
upon the payment to him of a pro rata part of the entire purchase mon- 
ey owing and unpaid. Evidently it was contemplated that the privi- 



32 250 FEDERAL REPORTBB 

lege was to be exercised when the subdivisions sbould be sold and con- 
veyed. Delay in the exercise of the privilège was likely to, and did, 
mean delay in the payment of part of the purchase price contracted 
for by the appellee. In so far as the appellee sustained loss by that de- 
lay, he should be compensated for it. The allov^rance of interest is the 
appropriate method of compensating for unwarranted delay in the 
payment of money. Appellants would escape the duty of doing equity 
if the provision in question is given the effect of entitling them to get 
their lands released now upon the payment of the same amounts they 
would bave had to pay, if they had» exercised the privilège accorded 
them when they made their purchases 10 years ago. As the resuit of 
payments on the purchase price made by others, the amount decreed in 
appellee's favor is less than the aggregate of what was required to ob- 
tain releases of the subdivisions foreclosed when the right to' do so ac- 
crued, with interest added from the dates of the accrual of that right 
to the several purchasers of such subdivisions. It is not made to ap- 
pear that the appellee, by contract, estoppel, or otherwise, has lost the 
right to bave the above-quoted provision of the deed of trust com- 
plied with by a subséquent purchaser of part of the tract sold, who 
seeks to get a release of his land from the liens securing the purchase 
price of the entire tract of which his land was a part. 

[2] But for the above-quoted provision, there could be no question 
as to the appellee's right to enforce his deed of trust, for the entire 
amount remaining due on the debt secured by it, against the whole or 
any part of the unreleased land. In the absence of such a provision, a 
mortgagee could gratuitously release any of the land covered by the 
mortgage without afifecting or impairing his right to enforce the mort- 
gage against the part of tht mortgaged land which was not released. 
It is suggested that the provision mentioned had the effect, not only of 
entitling the grantor in the deed of trust or subséquent purchasers of 
parts of the land embraced in it to bave such parts released upon pay- 
ing proportional parts of the whole purchase price of the incumbered 
land, but also of entitling a subséquent purchaser of part of the land 
to bave the land he purchased released without complying with the 
conditions expressed in the deed of trust, if the appellee has released 
parts of the land purchased by others without exacting compliance by 
them with the conditions on which they were entitled to releases. We 
are not of opinion that such effect properly can be given to the provi- 
sion in question. It does not purport to put any restriction or limita- 
tion on the right of the appellee to release part of the land, gratuitous- 
ly if he chooses, without affecting or impairing the right which the 
deed of trust gives him against the remainder of the land embraced 
by it. The provision granted the privilège of obtaining partial releases 
on stated terms. It did not purport to affect the appellee's right to 
give releases on différent terms. The appellants were not prejudiced 
by purchasers of other parts of the mortgaged land getting releases for 
nothing, or for less than the mortgagee was entitled ta exact. That did 
not add to the amounts they were required to pay to get their lands 
released. They hâve nothing to complain of so long as they are per- 
mitted to get their lands released on the terms stated in the deed of 



CABSON V. HURT 33 

trust. Under the decree appealed from they had the benefit of ail pay- 
ments that had been made on the purchase price of the land embraced 
in the deed of trust. They will get ail to which they are entitled under 
the above-quoted provision, if they are allowed to secure the release 
of their land upon payment of proportional parts of the entire pur- 
chase price still owing and unpaid. We are not of opinion that appel- 
lee's acts in releasing- other subdivisions from his liens had the effect 
of a release of the subdivisions bought by the appellants, or of giving 
to the latter the right to bave their subdivisions released, not on the 
terms prescribed by the deed of trust, but on the terms on which the 
appellee, without being bound to do so, released other subdivisions. 

[3] The notes secured by the foreclosed deed of trust provide for 
the payment of an attorney's fee of 10 per cent., if placed in the hands 
of an attorney or coUected by suit. The only tender made by any of 
the appellants before the suit was brought was of less than he was re- 
quired to pay to be entitled to a release of his land. This being so, ap- 
pellee had the right to bring suit for the f oreclosure of his liens, and to 
make the appellants défendants to that suit. The costs and attorney's 
fées to which he is entitled are chargeable against any unreleased land 
against which he was justified in enf orcing his liens by suit. The lands 
of the appellants were in that category. The appellants had not, before 
the suit was brought, donc that which would make appellee's enforce- 
ment of his lien by suit wrongful or unjustifiable as to them. Appel- 
lee did nothing that can be given the effect of forfeiting his contract 
right to be allowed an attorney's fee. The appellants are not entitled to 
be relieved of their proportionate part of the expense, including the 
attorney's fee stipulated for, of the suit, the institution of which 
against them was justified by their defaults. 

[4] It is not so clearly made to appear by the record that the amount 
of the secured debt found to be due was more than was actually due as 
to justify the setting aside of the finding of the trial court. The rec- 
ord contains a statement of évidence adduced by the opposing parties, 
which their respective counsel certified was "examined and found cor- 
rect." This statement was not approved by the court or judge, pursu- 
ant to equity rule 75 (198 Fed. xl, 115 C. C. A. xl). Nothing in it 
shows that it contained ail, or the substance of ail, the évidence adduc- 
ed. The contrary not appearing, it is to be presumed that the court's 
findings were supported by évidence other than that which the record 
on appeal discloses. Furthermore, even on the évidence which is set 
out, it does not seeni to be permissible to make the appellee's book en- 
tries conclusive against him. The payments on the secured debt were 
made by or through the O. W. Kerr Company, the seller of the land 
in parcels. It was to the interest of that company to get the benefit of 
ail payments made. A statement made by it not long before the suit 
was brought indicated that more was unpaid on the secured debt than 
the amount found to be due. 

[5] The assignments of error made by the 12 appellants are joint 

and not several. One of those assignments complains of the f allure 

of the court to decree on what was called a cross-bill filed by 3 of the 

appellants. The sole party défendant to that so-called cross-bill was 

250 F.— 3 



34 250 FEDERAL REPORTEE 

the First International Bank of South Bend, Wash. That bank filed 
an answer disclaiming any interest in the land, an alleged cloud on the 
title to which created by a mortgage to it was sought to be removed, 
and consenting for the court to enter any decree desired by the three 
parties who filed the cross-bill, provided costs were not taxed against it. 
The record does not indicate that the cross-bill was thereafter called 
to the attention of the court, or a decree on it sought. Some of the 
appellants who join in the assignments of error are without any inter- 
est în the fate of that collatéral proceeding. It is not made to appear 
that the institution and pendency of that proceeding were even brought 
to the notice of the appellee, or that he resisted, or was interested in re- 
sistin^, the granting of the relief it sought. It seems that the answer 
filed by the only party défendant to that proceeding was by itself 
enough to dissipate the alleged cloud complained of. In the circum- 
stances stated, the decree appealed from is not to be reversed because 
of the court's failure to make disposition of the cross-bill. 

[6] The conclusion is that the decree appealed from would not de- 
prive the appellants of any right to which they are entitled, if it is so 
modified as to permit each of them to prevent the ordered sale of his 
land by paying his proportionate part of the amount decreed in favor 
of the appellee, including costs, the amounts to be paid by the several 
appellants to be in the same ratio to the whole amount decreed that 
the several tracts bought by them bear in acreage to the larger tract 
foreclosed and decreed to be sold. Whatever right the appellants and 
others in like situation hâve under the above-quoted provision of the 
deed of trust to hâve land embraced therein released is a derivative 
one, resulting from their occupying the status of assigns of the grantor 
in that instrument. If that grantor had not conveyed to others the 
lands still unreleased, his privilège of having part of that land released 
would hâve been conditioned upon his "payment of such part of the 
entire unpaid purchase money as is prorated, owing and unpaid on 
the land for which such release may be demanded." He would not 
hâve been entitled to such an allotment of less than pro rata parts of 
the unpaid purchase money against the several subdivisions of not less 
than 640 acres each as would resuit in leaving a part of it unsecured 
by the land remaining subject to the deed of trust. His assigns, as 
a class or separately, bave not acquired a privilège of having their 
lands released on such terms as would lead to the resuit just mentioned. 
In the argument of the case in this court the counsel for the appellee 
expressed a willingness for the above-indicated modification of the 
decree to be made. Such modification is accordingly ordered, with 
direction that the amount required to be paid by each appellant to se- 
cure a release of his land be ascertained and stated, and 30 days there- 
after allowed to the several appellants to pay such amounts into the 
registry of the court. Subject to compliance with this order, the de- 
cree is affirmed, with costs against appellants. 

Modified and affirmed. 

BATTS, Circuit Judge (dissenting). I regret that I cannot entîrely 
concur in the conclusion reached by ray Brethren. William Hurt, ap- 



CARSON V. HURT 35 

pellee, hereinafter called plaintiff, on December 1, 1906, sold to W. H. 
Garrett, by warranty deed, 85,844.95 acres of land in Bailey county, 
Tex. Subsequently the title was placed in W. H. Sulflow, and the 
business of selling the land was conducted in the names of two corpo- 
rations, the O. W. Kerr Company and the Texas & Southwestern Col- 
onization Company. Thèse parties will be called the purchasers. The 
land, or most of it, was sold in smaller tracts in 1907, and the pur- 
chasers of thèse tracts will be called the subpurchasers. The recited 
considérations of the sale to Garrett were as follows: (1) The as- 
sumption by Garrett of notes due by Hurt to bis vendor, to the amount 
of $106,058.80; (2) the payment of $50,000 cash; (3) the payment of 
notes aggregating $187,321. This deed provided for a lien to secure 
the purchase price. Contemporaneously with the exécution of the deed, 
a deed of trust was executed which specifically referred to and ex- 
pressed a lien on the land to secure the payment of the notes last men- 
tioned. In the deed of trust was the f ollowing provision : 

"This ewavej'ance in trust is made with the express agreement and under- 
standing that a full release of this trust, as well as a full release of the 
vendor's lien, will be exeented aud delivered to the said W. H. Garrett, his 
heirs aud assigns, ns to any quantity or parcel of land embraeed in this con- 
veyance, not less than C40 acres, upon payment of sueli part of the entire 
unpaid purchase nuoney as is pro rata owing and unpaid on the land for 
which such release may be demanded." 

In the contract under which Hurt had purchased the land was a like 
provision. The circumstances under which the sales were made indi- 
cate the reason for the provision. It was contemplated that the land 
should be sold in small tracts, and it was realized that it would be 
necessary that releases be provided for, in order that a good title 
might be given to the purchaser. By the terms of the provision, its 
benefits could be secured by the heirs and assigns of the purchaser. 

The appellants insist that the provision quoted fixed on each tract of 
land sold a definite amount of $2.19 per acre, upon payment of which 
the purchaser is to hâve his land released. This contention is upon 
the assumption that the release is to be had upon payment of the pro- 
portionate part of the amount secured by the deed of trust. Taking 
into considération the original provision in the deed to Hurt, and the 
clause in the provision quoted, to the effect that the release is to be 
had upon payment of such part of the entire unpaid purchase money 
as is pro rata due upon the particular tract, the conclusion is reached 
that, primarily, and after payment of the $50,000, the payment to be 
made to secure a release was, instead of $2.19, $3.41 per acre, or the 
total purchase price remaining unpaid, divided by the total acreage. 

The provision required the payment, in order to secure a release, of 
such part of the unpaid purchase money "owing and unpaid on the land 
for which such release may be demanded." It was contemplated, of 
course, that the land would be paid for in accordance with the terms of 
the deed and of the notes given as part of the purchase price, and it 
was contemplated that, to secure a release, the purchaser would be in 
position to demand the release upon payment of the "pro rata part" 
remaining unpaid "on the land for which such release may be de- 



36 250 FEDERAL REPORTER 

manded." Whenever, by payment on the part of the vendee (pur- 
chaser) under the deed, the amount unpaid was reduced, a new status 
resulted, and each subpurchaser's "pro rata" on his land was corre- 
spondingly reduced. The provision was made for the benefit of each 
subpurchaser, and, whenever any right arose to him by virtue of any 
payment made, no action on the part of the vendee (purchaser) from 
whom he bought, or on the part of the plaintiiï, could injuriously affect 
thèse rights. 

The évidence indicates that releases were made upon such a basis 
that, if ail of the acreage had been released on the same basis, the pay- 
ments for releases would hâve been insufficient to hâve discharged the 
entire indebtedness. The seller of the land, the plaintiff, had, of course, 
the right to release any tract that he might choose to release ; and if, 
as was the case, his vendee joined in the request for the release at this 
inadéquate price, both of the parties would be bound by the action, and 
the release would be in ail respects effective. This, not by virtue of 
the contract, but because the vendor would hâve a right, notwithstand- 
ing the contract, to give away his property if he wanted to. Such a 
release, however, could not bave the effect of placing a subpurchaser 
in a less favorable position than prior to such release. If, to illustrate, 
there had been outstanding so much of the unpaid purchase price as 
would bave required a payment of $3 per acre for its discharge, and 
the plaintiff, at the request of his vendee, had released certain of the 
lands at $2 per acre, whereby there would be due upon what was left 
a larger amount than $3 per acre, subpurchasers, whose rights had been 
fixed prior to that time, would nevertheless bave the right, by paying 
the $3 an acre, to secure releases. 

It is insisted by appellants that the course of conduct between the 
plaintiff and the purchaser in the giving of releases to a number of the 
subpurchasers at $1.90 and less created a condition which authorized 
other subpurchasers to secure releases for like amounts. As suggested, 
the limit of the restriction upon the plaintiff was that he could not exé- 
cute a release that would injuriously affect persons whose rights had al- 
ready been fixed. He did not, by taking less than he had a right to 
demand, do anything that he did not hâve a right to do. But this 
action on his part could not take away rights which had already been 
fixed in other people, nor did it give them new rights. The clause 
was executed for the purpose of making it practicable for the vendee 
(purchaser) to resell the land, by making it possible to give good titles 
to the subpurchaser, without taking up the notes executed for the pur- 
chase price before they were due. If a construction is given to it 
which would authorize the plaintiff, the original vendor, to accept re- 
leases for an amount less than he had a right to demand, with the ef- 
fect of adding this déficit to the amount which subpurchasers subse- 
quently demanding releases would bave to pay, the value of the clause 
would be entirely destroyed. 

The actual course of events in this case illustrâtes, as well as any 
facts which might be imagined, the effect of such a construction. The 
évidence shows that releases were accepted as low as $1.63 per acre. 
At a subséquent date, and at a time when the appellants in this case 



CAESON V. HURT 37 

were undertaking to secure releases by the payment o£ a proper re- 
lease price, the plaintiff wrote : "I can't release the land until I am 
paid $4 per acre." Subsequently he wrote : "You will hâve to pay $5 
per acre to get releases." At one time Hurt wrote the purchaser that 
there was $30,929.85 "you are due me without any further releases." 
In other words, according to his statement, on May 26, 1911, he had 
executed releases, receiving by $30,929.85 less than he had a right to 
demand. No complaint can be made against the exécution by hnii of 
such releases, but to charge the persons whose lands had not been re- 
leased with an additional $30,929.85, and require its payment, before 
releases to them would be executed, would be to entirely destroy the 
rights which the provision under considération undertook to fix. 

The sales to appellant were made in 1907 and early in 1908. Subsé- 
quent to thèse sales their vendors (the purchasers) paid off the notes 
to Garrett, aggregating $106,058.80, which they had assumed when the 
land was purchased from Hurt. It is insisted that this payment did 
not reduce the amount which appellants would hâve to pay in order 
to entitle them to releases. It is suggested that the status is the same 
as if they had contracted to pay a fixcd and certain sum before they 
were entitled to releases, and that they were not entitled, under any 
circumstances, to hâve this amount reduced by payments by some- 
body else. Thèse subpurchasers hâve warranty deeds from the perj 
sons who paid off the notes executed by Hurt, and which they had 
assumed. The payment of thèse notes made their obligations to their 
vendees (the subpurchasers) good pro tanto. If they had paid off 
ail their obligations to Hurt, the warranties of the deeds would hâve 
been made good. If they had paid, as they contracted, not only would 
the amount required for the releases hâve been reduced, but would 
hâve been wiped out entirely. Indeed, the necessity for individual 
releases would hâve been eliminated. It could just as well be said 
that the purchasers (from Hurt) could recover from the subpurchasers 
amounts paid by them which reduced the amount required to be paid to 
secure releases for subpurchasers as to suggest that payments made by 
the purchaser did not hâve the effect of reducing the amount required 
to be paid by the subpurchaser for releases. The obligations were 
the obligations of the purchaser. It was contemplated that they should 
be paid. It was contemplated that the subpurchaser should make his 
payments to the purchaser. The release clause was made for the con- 
venience of the purchaser and the saf ety of the subpurchaser. 

Each appellant has already paid to the purchaser a sum largely in 
excess of that required to pay his proportionate part of ail the liens 
upon the land, including the notes of Hurt, which were assumed, and 
the notes to Hurt, for a part of which judgment is now rendered. To 
illustrate : The proportionate part of the original lien chargeable 
against the section sold to appellant Forkenbrock was $2,176. He 
has already p^id $4,560 on his land, and he is now called upon, in addi- 
tion, to pay $z;,176 and interest and attorney's fées. The money which 
he paid was used in the discharge of the $106,058.80 lien, but he is not 
to get any benefit, so far as a release is co'ncerned, from the payment. 
The appellants in this case were subpurchasers of about 12,000 acres of 



38 250 FEDERAL REPORTER 

land, less than one-seventh of the whole. They hâve already paid 
$92,808, more than six-sevenths of the total amount required to take 
up the assumed notes of Hurt. This lien was discharged, and they 
ought no longer to be called upon to make payments measured by it. 
It having been paid, not more than the $187,000 of notes given to Hurt 
remained unpaid. They had the right to releases by paying their pro- 
portionate part of this amount remaining unpaid. It was the obligation 
of the purchaser to pay the assumed notes. It was the right of the 
subpurchaser that they be paid. The status creafed for them by its 
payment could not be injuriously aiïected by any person other than 
themselves. 

To further elucidate the views expressed: After the payment of 
the $50,000 there remained unpaid the notes due to Garrett, $106,- 
058.80, and the notes due to Hurt, $187,321, a total of $293,379. To 
hâve secured a release at that time, the required amount per acre would 
hâve been determined by dividing the $293,379 by the total acreage, 
85,844, and the resuit would hâve been $3.41 per acre. About Decem- 
ber 1, 1908, the $106,058.80 was paid. Other payments to that time 
reduced the debt (according to the auditor whose report was the basis 
of the judgment) to $129,617. There had been released to this time 
(according to the Hst furnished by plaintiff) 35,642 acres, leaving a 
balance of 50,202 acres. The debt, divided by the acreage, would give 
as a resuit 2.58. At that time the subpurchaser would hâve had to 
pay, to be entitled to a release, $2.58 per acre. Between December 
1, 1908, and December 1, 1912, the debt was reduced $63,102, leaving 
unpaid $66.515 (auditor's figures). Dùring this period 34,020 acres of 
the land were released. The persons securing releases, instead of 
paying $2.58 per acre, paid on an average $1.85 (interest excluded in 
both cases). After December 1, 1912, in order to secure a release on 
the balance of the land, 16,182 acres, it would hâve been necessary to 
pay $4,16 per acre, the resuit of dividing $66,515 by 16,182. The in- 
crease from $2.58 to $4.16 resulted from giving releases for less than 
could hâve been demanded. The interest for the period between De- 
cember 1, 1908, and December 1, 19l2, would hâve been 24 per cent., 
and would bave increased the $2.58 to $3.20. To the date of the de- 
ciree, March 5, 1917, 8 years and 3 months, the interest would hâve 
increased the $2.58 to $3.85. Appellants, instead of paying $3.85 per 
acre, are compelled by the decree to pay more than $6 per acre. 

Appellants' contention that the amount to be paid by them was to be 
determined without adding interest to the purchase price is entirely 
without merit. The interest provided for is a part of the purchase 
price. While nothing could be done by any one else to injuriously af- 
fect their status, ànd while they were entitled to get the benefit of any 
payment which the purchaser might bave made, if, the amount pay- 
able to secure a release having become fiXed, the subpurchaser fails 
then to demand a release, the amount payable necessarily increases 
with the accruing interest. The évidence indicates that the appellants, 
before suit was instituted, were undertaking to discharge whatever 
amounts might be necessary for them to pay in order to secure releases. 
They made tender of the amounts which they thought due. The plain- 



CAKSON V. HUST 39 

tiff reftised to accept it, making demands in excess of what was in 
fact due. Under the circumstances, it would be inéquitable to charge 
up against the subpurchasers the attorney's fées for which the pur- 
chaser became responsible. The conclusion is reached that each one 
of the appellants should, in order to secure a release, pay such an 
amount as would now be necessary for him to pay, including interest, 
if each of the subpurchasers who secured releases had, for such re- 
lease, paid to the plaintiff the entire amount which the plaintiff could 
hâve demanded. 

Appellants claim that the amount of the judgment is excessive. The 
transactions ran over a period of years, and involve many separate 
payments of money. The court permitted the introduction of a state- 
ment made by an auditor, which became the basis for the judgment 
which was rendered. In addition to this there was introduced the day- 
book (in the form of a journal) and ledger of the plaintifï. There was 
also introduced a statement as to releases made by him as a part of an 
answer to an interrogatory. The daybook and ledger were made by 
the plaintiff contemporaneously with the transactions from which he 
received money. He testifies : 

"Thèse books, my .iournal and ledger, are my records as I kept them regard- 
ing lands I released. When I would give a release, I would enter it on my 
daybook hère, showing what a man paid, and the section of land and the 
number of acres, and then I transferred those items into the ledger." 

The daybook entries are copied into the record, accompanied by 
memoranda indicating the différences between the daybook and the 
ledger. Thèse daybook and ledger entries do not correspond with 
the resuit of the auditor's work. It is insisted by appellants that the 
account books of plaintiff show payments to the amount, exclusive 
of the payment of the notes assumed by the vendee, of $201,706.89, 
and they claim that the release statement shows (with items which 
should be added) payments to the amount of $207,428.73. The amount 
actually shown by the daybook is $178,685.59. Appellants insist that 
an item of $21,772.80, dated November 18, 1907, is shown by the day- 
book. No crédit for this amount is given. It is charged up against 
the owners of the land for releases, but there is no corresponding créd- 
it of payment. It is reasonably apparent, from the circumstances and 
the entries in the books, that, prior to that time, $50,000 having been 
paid, the release was demanded and made on account of such pay- 
ment. This item, together with the item of $1,248, under date of May 
1, 1914 (which is also charged up, but for which no crédit is given), 
çonstitute the différence between the amount clainied by appellants to 
hâve been paid according to the daybook, and the amount which the 
daybook in fact showed. The release statement, as introduced in évi- 
dence, shows only $116,113.66. This statement is entirely valueless in 
reaching the amount of money due on the debt. It not only omits the 
amount of payment in cash primarily made, for which no releases were 
demanded, but also omits 12 or more items of payments for releases 
that are indicated by the daybook. 

While appellants' insistence that the amount due is either $32,358.61 
or $38,070.45 cannot be sustained by the record, a careful examina- 



40 250 FEDERAL REPORTEE 

tion 6f ît discloses that the auditor's statement does not include every 
payment indicated by the bocks of the plaintiff. Leaving out of con- 
sidération the ïnterest items, the auditor gives crédit for $5,630.41 less 
than is shown by the books. A careful checking of the two accounts 
discloses the items not credited in the auditor's statement. A crédit 
on October 22, 1908, "By draft, $2,416.25," is not in the statement. 
On May 14, 1912, a crédit is given, "By checks and drafts 6/27, 
paid 8/26, $4,448.00." Of the amounts going to make up this $4,488, 
the release for one tract, amo.unting to $1,761.24, is included in the 
auditor's statement and the balance, $2,727.76, is not. On Febru- 
ary 7, 1913, crédit is given, "By check, part payment on one-half sec- 
tion 10, Block C, $504.00.'" This amount is not credited in the state- 
ment. Thèse crédits in the day book, for which no corresponding 
crédit in the audit statement is made, amount to $5,648.01. The audit 
statement shows à payment on July 22, 1907, of $17.60, which does not 
appear in the daybook. Subtracting this, the différence between the 
amounts which the plaintiff states he has received by the entries in 
his daybook exceeds the amounts credited în the auditor's statement by 
$5,630.41. The daybook shows on May 30, 1911, a crédit of $15,386.- 
55. It appears that this was originally $21,000 on the daybook, and it 
still appears as that sum in the ledger. Appellants insist that the plain- 
tiff should be charged with the $21,000. The correspondence incor- 
porated into the record shows that on May 30, 1911, the date of the 
èntry, Hurt drew a draft, with release attached, for $21,000. Subsé- 
quent letters indicate that this draft had not been paid as late as July 
7th thereafter. In the absence of additional proof, it will be assumed 
that the crédit of $21,000 was made when the draft was drawn, and 
that subsequently, the draft not having been paid, the entry in the day- 
book was changed to correspond. 

The court suggests that the statement of évidence was not approved 
by the District Judge. Counsel for appellee, understanding, doubtless, 
the conditions by which this was brought about, does not undertake to 
take advantage of this fact. It is also suggested that the principal 
debtor acknowledged a greater indebtedness than that found due. 
Such an acknowledgment is apparently in conflict with the facts, and 
ought not to bind the other défendants. 

The défendants John Carson, T. E. Jensen, and E. C. Shoemaker 
impleaded the First International Bank of South Bend, Wash., recit- 
ing that they had purchased certain of the lands in controversy, and 
that thèse lands had been conveyed to M. J. Johnson, as trustée for 
themselves, that said Johnson had executed a mortgage to the first 
International Bank, but that he had, in fact, no right to make the mort- 
gage, and that it was of no efïect. The First International Bank filed 
an answer, and disclaimed any interest in the land. The défendants 
complain at the failure of thé judgment to remove this cloud from 
their title. No reason appears why this should not be done. This 
would not require a reversai; the necessary modification in the judg- 
ment could be made hère. 

The judgment should be further modified as hereinbefore indicated. 



GEORGE V. OSCAR SMITH & SONS CD. 41 

GEOKGE V. OSCAR SMITH & SONS 00. et aL 

In re CRAWFORD. 

(Circuit Court of Appeals, Flfth Circuit. Mareh 18, 1918.) 

No. 3056. 

1. MOETGAGES <©=32 — WHAT XjAW GOVERNS DeI-IVEBY. 

Where notes and a deed of trust to socure tliem were exeeuted in the 
State of the borrower's résidence, and forwarded with draft attached for 
the amount of the loan to the résidence of the lender, where tliey were 
delivered on payment of the draft, tlie deed of trust and the notes did 
not become effective until delivery, so that the contract was consummat- 
ed in the state of the lender's résidence. 

2. USURT ($=2(3) — CONTRACTS — WlIAT IjAW GOVEBNS. 

Where, until delivery in Pennsylvania, a deed of trust on Mississippi 
land and notes exeeuted in that state did not become effective, the 
Pennsylvania usury statutes instead of Acts Miss. 1912, c. 229, control 
the validity of the transaction ; for the contract, tliough to be perfornied 
in Mississippi, was a Pennsylvania contract, over which the Mississippi 
statutes had no control. 

3. Corporations <3=>G57(3) — Foreign Corporations — Contracts — Validity. 

ïhat foreign corporation had previously vlolated laws of Mississippi 
by doing business m that state vvithont authority does not render unen- 
forceable contract made by such eori)oration in a foreign state, though It 
was to be performed in Mississippi. 

4. Corporations <®=»642(4) — Fobeign Corporations— Doing Business jn 

State. 

Where a Pennsylvania corporation in that state made a loan secured by 
a deed of trust on Mississippi land, the deed of trust, tliough exeeuted 
in Mississippi, being delivered in Pennsylvania on the corporation's pay- 
ment of a draft attached thereto, such corporation was not doing busi- 
ness in Mississlpiù, so its failure to eoinply with the Mississippi statutes 
prescribing conditions upon which foi-eign eori)orations iniglit do business 
in the state would not preclude enfoi'cenient of the deed of trust. 

Batts, Circuit Judge, dissenting. 

Pétition to Superintend and Revise and Appeal from the District 
Court of the United States for the Southern District of Mississippi; 
Henry C. Niles, Judge. 

In the matter of the bankruptcy of V. h. Crawford. From a decree 
which permitted the Oscar Smith & Sons Company and others to 
foreclose a deed of trust given by the bankrupt, A. L,. George, trus- 
tée, appeals, and likewise pétitions to superintend , and revise. Af- 
firmed. 

Henry P. Dart and WilHam Kernan Dart, both of New Orléans, 
La. (Benjamin W. Kernan and Henry P. Dart, Jr., both of New Or- 
léans, L,a., on the brief), for appellant. 

Robert H. Thompson, of Jackson, Miss., and Albert S. Bozeman, 
of Meridian, Miss. (J. Harvey Thompson, of Jackson, Miss., on the 
brief), for appellees. 

Before WALKER and BATTS, Circuit Judges, and EVANS, Dis- 
trict Judge. 

®=5For other cases see saine toplc & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexes 



42 250 FEDERAL REPORTER 

WALKER, Circuit Judge. By appeal, and also by pétition to su- 
perintend and revise, A. L,. George, trustée of V. L. Crawf ord, a bank- 
rupt, présents for review a decree an effect of which was to permit 
the foreclosure of a deed of trust given by the bankrupt to secure the 
payment to Oscar Smith & Sons Company, a corporation, of $25,000 
and interest, evidenced by nine notes made by the bankrupt. The 
principal ground upon which the right to enforce the deed of trust was 
denied was that the contract was infecfed with usury; and it was con- 
tended that it is governed by the law of Mississippi, and that the rate 
of interest contracted for was such as, under the law of that state 
(Acts of Mississippi 1912, p. 301), results in the forfeiture of the 
principal and ail interest. The opposing contentions were that there 
was no usury in the contract, and that it was a Pennsylvania contract, 
and, if it was usurious, the resuit was, not to invalidate the contract, 
but to render uncollectable only so much of the interest reserved as 
was in excess of the légal rate. 

The correspondence which passed between the lender and the bor- 
rower before the deed of trust and the notes it secured were execut- 
ed we think clearly shows that the lender was to be paid, as compen- 
sation for the loan of the money, an amount in addition to the 6 per 
cent, per annum interest which the secured notes by their terras called 
for, and that thîs amount 'was such as to make the compensation for the 
use of the money for the period the loan was to run more than 8, but 
less than 20, per cent, per annum. 

[1, 2] The deed of trust was signed and acknowledged in Mississip- 
pi, the property it covered was located in Mississippi, and the notes it 
secured were made payable at the Eirst National Bank of Meridian, 
Miss. A représentative of the lender, the principal place of business of 
which was Philadelphia, Pa., went to Mississippi, investigated the se- 
curity proposed to be given for a loan of $25,000, which was to in- 
clude an unsecured amount already advanced, reported favorably to 
his principal ; and thereupon the deed of trust and the notes it secured 
were prepared and' forwarded to Philadelphia, accompanied by Craw- 
ford's draft on Oscar Smith & Sons Company for the balance of the 
$25,000 to be lent, and the papers were delivered to the drawee in 
Philadelphia upon its payment of the draft. The deed of trust and the 
notes it was to secure were liot effective until they were delivered in 
Philadelphia. Delivery was required to make the contract they évi- 
dence. Tilden v. Blair, 21 Wall. 241, 22 L,. Ed. 632; Buchanan v. 
Drovers' National Bank, 55 Fed. 223, 5 C. C. A. 83. The contract 
was made in Pennsylvania and performance of it was to be in Missis- 
sippi. It was usurious under the laws of both states. In such case the 
légal conséquences of the violation of the law by the making of the 
contract for a usurious considération are determined by the law of 
the place where the contract is made. Andrews v. Pond, 13 Pet. 65, 
78, 10 E. Ed. 61 ; Heath v. Griswold (C. C.) 5 Fed. 573 ; Minor on 
Conflict of Laws, p. 433 ; 39 Cyc. 904, 908. Andrews v. Pond, supra, 
presented the case of a contract which was usurious under the law 
of New York, the state in which it was made, and under the law of 
Alabama, the state in which it was to be performed. The following 



GEORGE V. 080AB 8MITH A SONS CD. 43 

is the court's statement of the ground relied on to support the conclu- 
sion reached that the légal conséquence of the usury was determined 
by the law of the place where the contract was made : 

"The défendants allège that the contract was not made wlth référence to 
the laws of either state, and was not intended to conf orm to either ; that a 
rate of interest forbidden by the laws of New York, where the contract was 
made, was reserved on the debt actually due; and that It was concealed un- 
der the name of exchange, in order to évade the law. Now, If thls défense 
Is true, and shall be so found by the jury, the question la not whlch law is 
to govern in executlng the contract, but which la to décide the fate of a 
security taken upon an usurious agreement, which neither will exécute? Un- 
questionably, it must be the law of the state where the agreement was made 
and the instrument taken to secure its performance. A contract of this kind 
cannot stand on the same prineiples with a bona Me agreement made in one 
place to be executed in another. In the last-mentioned cases the agree- 
ments are permitted by the lex lod contractus, and will even be enforced 
there if the party is found wlthin its jurisdlctlon. But the same rule cannot 
be applied to contracts forbidden by its laws and designed to évade them. 
In such cases the légal conséquences of such an agreement must be decided by 
the law of the place where the contract was made. If void there it is void 
everywhere, and the cases referred to In Story's Conflict of Laws, 203, fully 
establish thls doctrine." 13 Pet. 77, 78, 10 L. Ed. 61. 

The resuit of applying the rule stated to the facts of that case was 
the conclusion that the contract imder considération wa:s void be- 
cause under the law of New York that was the légal conséquence of 
the usury. But nothing in the court's statement of the rule governing 
a contract forbidden by the law of the place where it was made and 
also by the law of the place where it was to be performed indicates 
that the rule stated is applicable only where the contract is a void one 
under the law of the place where it was made. We understand the 
court's ruling to be that the légal conséquences of such a forbidden 
contract must be decided by the law of the place where the contract 
was made, whether that law makes the contract void or attaches a less 
penalty to the commission of usury. A contract reserving interest at 
the rate of more than 20 per cent, per annum is a forbidden one in 
Pennsylvania as well as it is in Mississippi, though the penalty in the 
former state is the loss of the right to collect any interest, while in 
the latter state the principal and ail interest are forfeited. We hâve 
not had access to the statutes of Pennsylvania relating to interest and 
usury, and hâve relied on summaries of such laws found in publica- 
tions which are supposed to be accurate in référence, to such a matter. 
As above stated, we understand the conséquence of making a usurious 
contract in that state is to render so much of the interest to be received 
uncoUectable as is in excess of the légal rate of 6 per cent, per annum. 
Under that law the deed of trust in question is not unenf orceable. 

The f ollowing is the Mississippi statute which it is contended should 
govern in determining the conséquences of the usury: 

"The légal rate of interest on ail notes, accounts, and contracts shall ba 
six per cent, per annum; but contracts may bè made, in wrlting, for a pay- 
ment of a rate of Interest as great as eight per centum per annum. And if a 
greater rate of interest than eight per centum shall be stipulated for or re- 
ceived In any case, ail Interest shall be forfeited, and may be recovered 
back, whether the contract be executed or executory. If a ' rate of In- 



44 250 FEDERAL REPORTEE 

lerest Is contraoted for or received, directly or Indirectly, greater tlian twenty 
per cent, per annuoi, the principal and ail interest shall be forfeited, and any 
amount paid on such eontract may bo recovered by suit." Acts of Mississippi 
1912, p. 301. 

The forfeiture provisions of this statute are pénal in their nature. 
The pénal laws of Mississippi are not effective on transactions hap- 
pening beyond the borders of the state. The statute does not purport 
to operate extraterritorially or to make a usurious eontract entered 
into in another state subject to the penalties it denounces. A forbid- 
den transaction occurring in Pennsylvania and having pénal consé- 
quences there does not subject a party to it to a penalty denounced by a 
Mississippi statute which does not purport to hâve such an effect. The 
transaction in question was such as to subject the lender to a penalty 
imposed by the law of Pennsylvania, the state in which the lending 
tpok place. It is that penalty which the lender incurred. If more than 
20 per centum per annum interest had been reserved, and payments 
on the eontract had been made to the lender in Pennsylvania, it hardly 
would be contended that the making of such payments gave rise to 
the right of action in the borrower'which the Mississippi statute would 
hâve made a conséquence of the transaction if it had happened in the 
latter stat,ç., We are not of opinion that the Mississippi statute oper- 
ated extratei-ritorially in the one way more than the other. It happens 
in the instant case that the deed of trust in question is enforceable for 
the principal of the debt secured whether it is the Pennsylvania law or 
the Mississippi law that governs in determining the conséquences of 
the usury. 

[3, 4] Another suggestion is that the deed of trust is unenforceable 
by the nonresident corporation to which it was made because of that 
corporation's f allure to comply with the requirements of the Mississippi 
statute prescribing the conditions on which such a corporation may 
do business in that state. Though that corporation, prior to the exé- 
cution of the deed of trust in question, did or transacted business in 
Mississippi in violation of the law of that state, that law does not 
purport to give to that conduct the efifect of invalidating a eontract 
subsequently made by the corporation in another state. The making 
of the eontract in Pennsylvania did not constitute the doing of business 
in Mississippi. In this connection, the décision in the case of Chatta- 
nooga Building, etc., Association v. Denson, 189 U. S. 408, 23 Sup. 
Ct. 630, 47 L,. Ed. 870, is called to our attention. In that case it was 
held that a delivery in Alabama to a Tennessee corporation's agent 
there of a note and mortgage to the corporation, which were payable in 
Tennessee, constituted the doing of business by the corporation in 
Alabama. That décision by no means supports the contention that the 
making of the eontract hère in question by the delivery in Pennsyl- 
vania of the deed of trust and the notes it secured constituted a doing 
of business in Mississippi. 

The conclusion is that the decree under review was not erroneous 
in denying an injunction restraining the foreclosure of the deed of trust 
mentioned. 

The decree is afifirmed. 



GEORGE V. OSCAR SMITH & SONS CD. 45 

BATTS, Circuit Judge (dissenting). The Smith Company (Oscar 
Smith & Sons Company, appellee), a New York corporation, loaned 
to Crawford (V. L. Crawford, using the name of Crawford Bleachery), 
of Meridian, Miss., $25,000, to secure which Crawford executed a 
deed of trust, naming Broach trustée. The notes evidencing the debt 
not having been paid, Broach advertised for sale the property conveyed 
by the deed of trust. Unsecured creditors instituted a proceeding to 
hâve Crawford adjudged a bankrupt, and A. L. George was appointed 
receiver. George instituted proceedings before the référée in bank- 
ruptcy against the Smith Company and Broach, and obtained an order 
restraining the sale. The pétition set up: (1) That at the time of the 
exécution of the deed of trust Crawford was insolvent, and that the 
Smith Company had knowledge of his insolvency, and that the deed of 
trust was fraudulent, and gave the Smith Company an illégal préfér- 
ence ; (2) that the trustée was about to embrace property in the sale not 
included in the deed of trust. The Smîth Company answered, and 
the receiver, amending, further charged that the debt due the Smith 
Company was usurious, and that the Smith Company was a nonres- 
ident corporation, doing business in Mississippi, without having filed a 
copy of its charter, as required by law, and that the debt was con- 
tracted in the course of the company's business carried on and donc 
in that state. 

The référée heard évidence and denied the motion to set aside the 
restraining order. This action was reviewed and reversed by the 
United States District Judge, his decree finding that the deed of trust 
was not given to def raud creditors ; that the trustée was not under- 
taking to sell property not covered by the deed of trust ; that the notes 
«ecured by the deed of trust were not usurious ; and that the Smith 
Company was not carrying on a business in Mississippi within the 
meaning of the Mississippi law. This judgment is before us for re- 
view. 

The finding that the deed of trust was not executed for the purpose 
of defrauding creditors is sustained by the évidence. 

The questions remaining for détermination are : (1) Is the transac- 
tion one affected by section 935 of the Mississippi Code of 1906? (2) 
Was the contract subject to the laws of the state of Pennsylvania or 
to those of the state of Mississippi? (3) If subject to the laws of the 
state of Mississippi, was the contract usurious? and, if usurious, to 
what extent? and is the interest alone to be forfeited, or is the entire 
contract void? (4) If the contract is a Mississippi contract and usu- 
rious, are the fédéral courts to give eftect to the conséquences indicated 
by the statutes of Mississippi ? 

Section 935, Mississippi Code 1906. 

The validity of the notes and mortgage is attacked upon the ground 
that the Smith Company was carrying on a business in Mississippi 
without complying with section 935 of the Mississippi Code of 1906. 
This section requires every foreign corporation doing business in Mis- 
sissippi to file a copy of its charter, and it is provided that any foreign 
■corporation "which shall not file a copy of its charter, as provided "in 



46 250 FEDERAL EBPOETER 

this chapter, shall be liable to a fine of not less than $100." The ques- 
tion arises as to whether or not the Smith Company was "doing busi- 
ness" in the sensé in which thèse words were used in the statutes of 
Mississippi. The Smith Company conducted its business from an of- 
fice in Philadelphia. The transactions in Mississippi arose out of con- 
tracts made by the concem for the sale of Hnters to be used in Delaware 
and elsewhere. The purchases by it to fulfill its contracts were primari- 
ly from Crawford. The necessity for securing the required linters, 
which could not be satisfactorily met by Crawford, resulted in purchas- 
es from other sources in Mississippi and adjoining states, and the con- 
centration at Meridian in warehouses for bleaching at the mill of Craw- 
ford. The loan to Crawford arOse out of thèse transactions. The 
transactions were scarcely of a kind in contemplation by the Législa- 
ture in the enactment of the cited laws. 

If they were of a kind intended to be covered by the législation, the 
intention could not be effective on account of the Interstate character 
of the business. International, etc., Co. v. Pigg, 217 U. S. 91, 30 Sup. 
Ct. 481, 54 h. Ed. 678, 27 L. R. A. (N. S.) 493, 18 Ann. Cas. 1103. 

The statute of Mississippi requires the filing of the charter of f oreign 
corporations, and provides for a small fine for a failure to file the char- 
ter. The law does not déclare that a contract entered into by a cor- 
poration which has failed to file its charter shall be void or otherwise 
afifected. It undertakes to impose a duty upon a foreign corporation 
doing business within the state, and indicates the conséquences to flow 
from a failure to perform. It is not an additional conséquence of such 
a failure that the corporation shall lose ail of the money which it may 
loan or otherwise use in the conduct of business within the state. 

Appellants rely upon the case of Denson v. Chattanooga Natl. Bldg. 
& Loan Ass'n, 107 Fed. 777, 46 C. C. A, 634, decided by this court. 
The language of the Constitution of Alabama and statutes of that 
state is very much stronger than that of the statute of Mississippi. 
The law of Alabama renders it unlawful for any corporation to trans- 
act any business in the state before naming an agent, and renders it 
unlawful for any person to act as agent without compliance with its 
terms. In the case cited the Building & Loan Association whose con- 
tract was under attack was clearly doing business within the state, and 
doing business without having complied with the laws of the state. 

Even if the Smith Company were doing business in the state of Mis- 
sissippi under conditions requiring the filing of its charter and the 
doing of other things indicated by its statutes, the transaction be- 
tween it and Crawford would not come under the terms of the law, 
and would not be affected by the failure of the company to do those 
things which are prerequisite ta legally doing business within the 
state. When a foreign corporation is doing business within a state, 
and subjects itself, so far as such business is concerned, to the laws of 
the state, or is doing business within the state, and as to such business 
fails to comply with the law, neither circumstance will affect its rights 
with référence to interstate business. The récital of facts heretofore 
made, and which will hereafter be more fully developed, indicates the 
strictly interstate character of the transaction between the Smith Com- 



GEORGE V. OSCAE SMITH & SONS CO. 47 

pany and Crawford, in so far as the loan of money was concerne^d. 
It must be held that the law of the state of Mississippi did not intend 
ta affect such transactions, and it must be further held that, if it did 
so intend, the intention would not be effective. 

What Law to Govern. 

In considering whether the vahdity and effect of the contract is to be 
determined by the law of the state of Mississippi or by the law of the 
state of Pennsylvania, an effort will be made to state the principles 
necessary to be considered in cases of this character. 

When persons within the territory of a state or country undertake 
to mutually bind themselves, the gênerai rule is that their légal relations 
are to be determined by the law of that jurisdiction. A contract 
is ordinarily entered into, and the considération upon which it is based 
passes, where it is to be performed. A contract, however, may be 
made in one state or country, be based upon a considération passed 
in another, and be performable in a third; or either of thèse éléments 
may concur in situs with another, and the third hâve a différent situs. 
Sometimes there will be other éléments, referable to still other places. 
When there is an absence of unity in the places to which the several 
éléments which enter into a contract or into its performance are ref- 
erable, and there is a différence in the laws which govern the places 
to which the several éléments are referable, détermination of the va- 
lidity of the contract présents difficulties in the solution of which the 
commentaries and décisions give little help. 

Probably the nearest approach to a gênerai proposition that may 
safely be made is this : The validity of a contract will be determined 
by the law with référence to which it is made. The accuracy of this 
proposition is to be determined by the statement hereinafter to be made 
as to its meaning. Moreover, the proposition itself is too gênerai in 
its character to be of any particular value in the practical application 
of the law. Perhaps this further proposition will be helpf ul : The law 
with référence to which a contract is made is the law of that country 
in which the more important éléments entering into the contract and 
its performance concur as to situs. The présent inquiry is concerned 
alone with contracts charged to be usurious, and bas spécial référence 
to such contracts of this character as are represented by promises to 
pay, based upon a considération already received. 

As to contracts of this character, a détermination of the law with 
référence to which they are made may, and in this case will, require 
considération of the following éléments: (1) The law of the place 
where the contract is made, under which will be discussed (a) the law 
generally ; (b) the résidence and citizenship of the parties, and where 
they were when the contract was made; (c) the place and manner of 
the negotiations and of the final consummation of the contract. (2) 
The considération and the place where it passed or was to become 
«ffective. (3) The law of the place where the contract is to' be per- 
formed. (4) The law of the place where the land mortgaged to se- 
cure the debt is situate. (S) The law of the place where the money 
borrowed is to be used. (6) The intention of the parties as to the ap- 
plicable law. (7) The law of the forum. 



48 250 FBDEEAL REPOETER 

L,ex Celebrationis 

In the absence of an élément with a différent situs, the law of the 
place vvhere the contract was entered into will détermine its validity. 
The oroposition is usually more broadly stated. It is sometimes said 
that if the agreement is a valid contract where made it is vaHd every- 
where, and that if void where made it is void everywhere. Thèse prop- 
ositions are true only upon the assumption that the law of the place 
adopts as a part of itself, with référence to an agreement some élé- 
ments of which are not directly referable ta the place of the making, 
the law of the place of performance, the law of the place where the 
considération passed, and the law of the place of other éléments en- 
tering into the contract. It is certainly well recognized by the author- 
ities that a contract may, within the jurisdiction within which it is 
made, be held valid by reason of the fact that it is to be performed 
elsewhere, when it would not be held valid if to be performed within 
the State in which it is made. It is also the case that the law of a 
State may hold a contract made within that state void on account of 
the character of the considération, as measured by the law of another 
State, when, if the considération had been referable to the law of the 
state in which the contract was made, it would hâve been sustained as 
légal. 

With référence to the law of usury, it may be said to be fairly well 
settled that if the contract has no éléments other than the place of the 
making, of the considération, and of the performance, the place of 
the first and second being the same, and the place of the third différ- 
ent, the contract would be sustained, if the interest rate is légal with- 
in either state. In the important case of Andrews v. Pond, 13 Pet. 65, 
10 L. Ed. 61, where the contract was held void, this principle is rec- 
ognized. A careful study of the many cases in which questions of 
the same gênerai character as those under considération hâve been 
discussed leads to the conclusion that the place of the making of the 
contract is an important élément; but that the law of the place of 
making is, in no sensé, conclusive of the legality or invalidity of the 
contract. 

That both parties are within the jurisdiction when the contract is 
made présents another élément that is not unimportant. When one 
of them is within the state and another is in another, an élément not 
less important appears. Especially is the fact of importr.nce if the 
parties are citizens of the states in which they may respectively be at 
the time the contract is made. Résidence and citizenship of the payor, 
for instance, when coupled with other éléments, as the place of land 
mortgaged to secure the debt, and the place where the money is to be 
used, may be of controlling force. 

The place where the negotiations are carried on may be of more 
importance than the place where the agreement already reached has 
its consummation in formai exécution and delivery of instruments. 
The place of the negotiations, coupled with other circumstances, may 
give rise to the presumption that the law of that place is the law with 
référence to which the contract is made, and the law by which its le- 
gality is to be determined. 



GEOEGE V. OSCAK SMITH & SONS CO. 49 

Negotiations are frequently conducted by mail, the parties being in 
and residing in différent states. In such cases it may not only be diffi- 
cult to détermine where the contract was made, but it may be still more 
diiïicult to détermine the extent to which the law of the place of the 
making should bave an effect, when a conclusion is reached as to the 
place of making. Not infrequently the correspondence may suggest 
other éléments of more importance than the mère place of making, as 
the situs of the securities offered, or a statement of the purpose for 
which the money is to be used, or a référence to the law which it would 
be necessary to consider. 

The instruments evidencing the contract may be prepared in one 
state and sent to another for exécution, or prepared and signed in one 
state and delivered through the bank or through the mails in another. 
There are some generalizations in the law as announced by the cases, 
to the effect that a contract will be held to bave been executed — that 
is, entered into — at the place where the last step necessary to its mak- 
ing was taken. 39 Cyc. 902; Tilden v. Blair, 21 Wall. 241, 22 L. Ed. 
632. There are also propositions to the effect that delivery may be 
accomplished by placing the signed instrument in the mail, and that 
the contract is regarded as made when it first takes effect so as to bind 
both parties. 39 Cyc. 670. It is also said that if the place of mailing 
and the place of payment are the same, the law of such place ordinarily 
governs. Corpus Juris, vol. 8, p. 90, § 151 ; Shoe, etc., Bank v. Wood, 
142 Mass. 563, 8 N. E. 753. And it is said that, when the instrument 
is signed in one state and delivered in another, the contract is made 
in the latter. Perry v. Pye, 215 Mass. 403, 102 N. E. 653. It may be 
that thèse rules would be of value in some cases ; but where the inquiry 
is as to what law should be regarded as the law with référence to which 
the contract is made, they are too entirely artificial to be of any value. 
Whenever technical légal propositions must be depended upon to dé- 
termine where a contract is made, the place of the making of the con- 
tract becomes of even less importance than it would ordinarily be. 
There are a large number of cases in which contracts formally made 
in one place bave had their validity determined by the law of another 
place. Ail of the authorities cited in support of other propositions 
made herein affirm the proposition that a contract may be valid, not- 
withstanding the law of the place of the making, or may be void, not- 
withstanding the law of the place of the making. The cases which 
dogmatically assert that the law of the place of the making will dé- 
termine the validity or the invalidity of the contract can, ordinarily, 
be sustained as to their resuit by the principles hereinafter discussed, 
and are to be held correct, not because of the law of the place of mak- 
ing, but because of the concurrence at that place of the situs of other 
important éléments which must be taken into considération in deter- 
mining the validity of the contract. 

Les C onsiderationis . 

Every contract must be upon a good and sufficient considération. 
If the considération is void, the contract will not be good. The con- 
sidération is measured by the law of the place where it passed or had 
230 F.— 4 



50 250 FEDERAL REPORTER 

îts being or effect. If the considération is there bad, it will be bad 
everyvvhere. 

As stated in Akers v. Demond, 103 Mass. 318: 

•Tenal laws can be admînisterecl only In the state where they exist, but 
when a usurious or other Illégal considération is declared by the laws of any 
State to be incapable of sustainlng any valid contract, and ail contracts 
arising therefrom are declared void, such contracts are not only vold in 
tliat state, but void in every state and everywhere." 

In the excellent work on Conflicts of I,aw by Minor is the following 
(page 431): 

"In determining the invalidity of the usurious contract, does the invalidity 
relate to the making of the contract itself, to its performance, or to the con- 
sidération? Where a contract to pay excessive interest is involved, does 
the usury consist in the borrower's promise to repay the principal vyith ex- 
cessive interest, or does it consist in a loan or forbearance of money upon 
condition that the borrower will repay the principal vvlth excessive inter- 
est? * ♦ * If the first view is correct, the alleged usurious Interest and 
invalidity of the contract to pay relates to its performance. The payment of 
the excessive interest and the validity of the payment of interest agreed upon 
should be determined by the law of the place v^'here the act or payment is tp 
be performed; that is, by the lex solutionls of the contract to pay. If the 
second view is correct, the usury relates to the considération, the loan of the 
uioney, and the law of the place where the money is delivered to the borrower 
goverus the validity of the contract to pay. * • * This is believed to 
be the better view. The policy of the usury laws is aimed against the ex- 
action of usurious interest by the leuder, not against the promise by the debt- 
or to pay usurious Interest." 

It may be that the law should be as stated. It may be doubted i£ the 
propositions are sustained by the authorities. Certainly many of the 
authorities cannot be reconciled with the theory advanced. In only 
one case of the many examined is the considération spoken of as usuri- 
ous where money or other value is properly represented in the principal 
of the note. It is, of course, the case that the considération of the 
promise to pay may be made up in part Of a prior debt with usury 
added, as in the case of Andrews v. Pond, 13 Pet. 75, 10 L,. Ed. 61 ; 
or the principal of the note may be made up entirely of usurious in- 
terest, as in the case of Scott v. Fabacher, 176 Fed. 229, 100 C. C. A. 
147. Ordinarily, however, that in considération of which the maker 
of the note promises to give usury is money or a thing of value, rep- 
resented by the principal of the note. It is a considération which 
would support a contract other than one of the kind entered into. The 
invahdity arises, not on account of this payment to the promisor, but 
on account of the agreement entered into, between him and the person 
furnishing the considération, that interest in excess of that allowed 
by law will be paid. Ordinarily, the parties are equally guilty from a 
légal standpoint, the illegality arising from their joint action. 

In passing upon the questions with référence to the considération in 
a contract involving usury, much confusion arises from the circum- 
stance that invalidity of the contract does not always resuit from the 
présence of usury. Where the statutes of the state define and crim- 
inally punish usury, without specifically indicating the effect of the 
usury upon the contract out of which it might arise, the contract will, 



GEORGE V. OSCAR SMITH & SONS CD. 51 

in accordance with the gênerai principle of law, be properly held void. 
I£, however, as is more usually the case, the laws of the state specifi- 
cally indicate the efïect upon the contract, the gênerai rule does not 
apply. In some of the states the law merely prevents the recovery by 
the promisee of so much of the interest as may be usurious. In others, 
where usury is provided for or paid, ail interest is uncoUectable, or 
niay be recovered if paid. In other states, if the interest is usurious, 
but does not exceed a certain named per cent., the interest is f orfeited ; 
anci, exceeding another named per cent., the entire contract becomes 
unenforceable. It is manifest that where a contract which, by reason 
of usury, is illégal and criminal, it is to be distinguished froni one 
where the usurious agreement of the parties merely results in defined 
losses. 

Confusion also arises from the assumption that every character of 
usurious contract is to bave applied to it the same rules of law. Where 
money is borrowed and a note is given for the amount loaned, ail 
parts of the contract are executed except the agreement to repay the 
money with the interest provided. In such case the contract may be 
illégal, but it is not on account of the considération passing from the 
promisor. The illegality results from the promise upon the part of the 
maker of the note to do a thing which the law will not permit. Some 
of the cases, however, which hâve been reported, and from which an 
effort is made to deduce légal principles, are contracts which hâve 
been substantially executed. The case of Andrews v. Pond, heretofore 
referred to, is of this class. In that case, one of the parties owing 
the other money, an amount was added to the debt ostensibly as ex- 
change, from which usury resulted. To pay the amount, debtor drew 
a bill of exchange payable in another state. In such case, ordinarily, 
nothing would be left for the debtor to do. The transaction would, as 
to him, be finished, except upon a failure by the drawee to pay or 
accept the bill of exchange. Likewise with référence to the créditer, 
the transaction is complète, except as necessity for action might arise 
on account of the failure of a third person to accept or pay. The 
transaction, in the ordinary course of business, would be a completed 
one. In such case the considération for the bill of exchange is usuri- 
ous. It is created, passes, becomes effective where the contract is made. 
The very basis of the contract is illégal, and in a jurisdiction as New 
York, where a usurious contract is void, the necessary resuit of this 
transaction would be an agreement void as a contract — ail its incidents 
there and everywhere void. 

Typical cases representing the diversity of views with référence to 
the effect of the law of the place of the considération are Orr's Admr. 
V. Orr, 157 Ky. 570, 163 S. W. 757 and Arnold v. Potter, 22 lowa, 
198. In the former case the law is thus stated : 

"The law of the place of payment of the note ordinarily controls, but this 
rule is subject to exceptions. For instance, the question of the validity of 
the contract, as afCected by the legalily of the past transaction in considération 
of which it was made, and in which it tools its inceptlon as a contract, is gen- 
erally held to be governed by the law of the place where the transaction was 
had, and not where the contract was executed or to be performed." 



52 250 FEDEIÎAL REPORTER 

lu the latter the facts that the notes were dated in lovva, made pay- 
able there, indorsed there, that the trustée resided there, that the se- 
curity was available there alone, and that the payor resided there, con- 
trolled, notwithstanding the negotiations were in Massachusetts and 
the money there paid. 

Lex Loci Solufionis. 

An important élément in determinlng the law with référence to 
which the contract is made is the place where it is to be performcd. 
The law is thus broadly stated : 

"Wheu a coutract is made in one country, and is to be performed in 
anotlier, the proper law of tlie contract may be pvesuiiied to be the law of 
the conntry where performance is to talce place, the lex loci solutionis." 9 
Cyc. 669, and authorities cited. 

Again : 

"Where the contract is to be performed in a place other than that In which it 
is made, the parties, according to the gênerai trend of American authorities, 
are presumed to adopt the law of the place of performance as the law of 
the contract." Hall v. Cordell, 142 U. S. 116, 12 Sup. Ot. 154, 35 L. Ed. 956 ; 
Pritchard v. Norton, 106 V. S. 124, 1 Sup. Ct. 102, 27 L. Ed. 104 ; Andrews v. 
Pond, 13 Pet. 65, 10 h. Ed. 61 ; Davidson v. Browning, 73 W. Va. 276, 80 S. E. 
363, L. R. A. 19150, 976. 

With référence ta bills and notes it is said : 

"Where a Mil or note is executed In one state and made payable in an- 
other, the gênerai rule is that it is governed, as to its nature, validity, in- 
terprétation, and effect, by the law of the state or country in which it is pay- 
able." 8 Corpus Juris, p. 92, § 153 ; Wiseman v. Chiapella, 23 How. 368, 16 
L. Ed. 466; In re Quality Shop, 205 Fed. 266, 125 G. 0. A. 403; Dickinson v. 
Edwards, 77 N. Y. 573, 33 Am. Rep. 671; Tenant v. Tenant, 110 Pa. 478, 1 
Atl. 532 ; Mayer v. Roche, 77 N. J. Law, 681, 75 Atl. 235, 26 L. R. A. (N. S.) 
763; Bigelow v. Burnham, 83 lowa, 120, 49 N. W. 104, 32 Am. St. Rep. 294. 

The authorities cited sustain the propositions which hâve been made. 
It is to be noted, however, that the propositions as made carry the 
inference of exceptions and limitations. The cases in which the va- 
lidity of the note has been determined by the law of a place other than 
the place of payment establish that while the place of payment is an 
important élément in determining the law to which the contract must 
be referable, it is, in no sensé, a conclusive élément. 

Law of the Place Where the Land Mortgaged to Secure the Debt is 
Situate. 
The gênerai proposition is that usury inheres in the loan and not 
in the security given; but since the intent of the parties is an élément 
in determining to what law the contract is referable, and since the situs 
of the land being necessarily the place of the remedy, the law of the 
forum must be taken into considération ; and, since the security is an 
important part of the contract of loan, the situs of real estate mortgaged 
to secure the debt is an important élément to be considered, in con- 
nection with others, in determining the law with référence to which the 
contract should be held to hâve been made. 39 Cyc. 905 ; Bedford v. 
Bldg. Ass'n, 181 U. S. 227, 21 Sup. Ct. 597, 45 L. Ed. 834; Commer- 
cial Bank v. Auze, 74 Miss. 609, 21 South. 754; Manhattan Life Ins. 



GEORGE V. OSCAB SMITH & SONS CO. 53 

Co. V. Johnson, 188 N. Y. 108, 80 N. E. 658, 9 L. R. A. (N. S.) 1142, 
11 Ann. Cas. 223; Gault v. Equitable Ce, 100 Ky. 578, 38 S. W. 
1065. 

"ïhe law of the place where the land is sltuated, where tlie note is seeured 
by mortgage, generally does not sovern, extept in case o£ a conflict as to 
u'sury laws." 8 Corpus Jiirls, § 158, p. 94. 

Except, as stated, in case of conflict in usury laws, the law of the 
State in which the mortgaged land is situate does not govern, and does 
not govern then in ail such cases ; the situs of the security is, never- 
theless, an important élément in determining the law with référence 
to which the contract is made. 

•'The inference tliat the parties contraeted with référence to the law of the 
domicile of either of them is greatly strengthened wlieu some important élé- 
ment of the transaction is located at the résidence of such party, such as the 
exécution of the note or other security, or the payment of the considération, 
or when the loao is seeured by a mortgage on land in the state of the party 's 
résidence." 39 Gyc. 904 ; Sheldon v. Haxtum, 91 N. Y. 124 ; Vliet v. Camp, 13 
Wis. 198; Fidelity Savlngs Co. v. Shea, 6 Idaho, 405, 55 Pac. 1022; Hubble 
V. Morristown Land Co., 95 ïenn. 585, 32 S. W. 965. 

The Place of Use. 

The place where the money borrowed is to be used is an élément in 
determining the law with référence to which the contract was made. 
The usury laws are based, at least in part, upon a considération of 
what the financial, conditions of the state in which the law is passed 
will justify in the way of interest, and what interest would, under con- 
ditions existing, be regardée! as too large. If in the state where the 
money is to be used the lawmaking power regards 10 per cent., for in- 
stance, as a rate of interest which the conditions justify, and the pay- 
ment of which would not violate pubhc poHcy, the contract ought rather 
to be measured by the laws of that state than by the laws of the 
state where the lawmaking power conceives that the payment of inter- 
est in excess of 7 per cent, is contrary to public policy. While the cases 
hâve not especially dwelt upon the law of the place where the money 
is to be used, it would appear to be a matter of very much more import- 
ance than the place named in the note as the place of payment, or the 
place which is indicated by the date of the instrument as the place 
where the money loaned was paid over to the borrower ; for f re- 
quently the use to be made of the money is the inducing cause of the 
contract, and it is frequently in contemplation that the note is to be 
paid from the profits of the use of the money in some business enter- 
prise. The business conditions at the place where the money is to be 
used are proper subjects for inqulry and for considération in deter- 
mining the loan, and in determining what the loan can aiïord to pay in 
the way of interest. The gênerai proposition made is sustained bv the 
cases of National Bldg. Ass'n v. Burch, 124 Mich. 57, 82 N. W.'837, 
83 Am. St. Rep. 311 ; Cope v. Wheeler, 41 N. Y. 303 ; 39 Cyc. p. 908. 

The Intention of the Parties as to the Applicable Law. 

One of the factors in determining the law with référence to which 
the contract is made is the law in contemplation by the parties. It is 
not infrequently the case that the contract contains a stipulation with 



54 250 FEDERAL EEPORTEK 

référence to what law should govern. This stipulation is not neces- 
sarily effective, and, indeed, not necessarily a reflection of the minds of 
the parties. The parties cannot, by intention or stipulation, change the 
essential character of the transaction between them ; they cannot, by 
intention or stipulation in ail cases, détermine the law to be applied. 
They cannot, by stipulating that the law of a particular state shall gov- 
ern, thereby make that valid which would otherwise be illégal. But 
where there is a diversity in the situs of the several éléments entering 
into the contract or its performance, the stipulation or understanding 
of the parties may hâve an important, or even a controlling, effect. 
The parties may not, however, disregard the place of making, the place 
of performance, and the place of enforcement, and sélect for them- 
selves a system of laws that has no relation to either of thèse places,, 
and thereby nullify or évade the provisions of the law which would 
otherwise be applicable. 

"When the several transactions connecter! with the loaning of inoney lave 
taken place in two or more States, the problem of determinlng what law 
shall govern, In declding whether the contract is usurious or not, is largely 
one of ascertainlng what law the parties had in mind in fixing their rights 
under the contract." 39 Cyc. p. 891. 

"In many cases the courts hâve declared that the law of the place where 
the contract is made détermines the rights of the parties, without référence 
to Intent. In nearly ail instances whére this holding has been made, the im- 
portant éléments of the transaction had their situs iu the place where the 
contract was made." Juuction R. Co. v. Ashland Bank, 12 Wall. 226, 20 L. 
Ed. 385. 

Lex Forî. 

There is no occasion to develop in détail the principles by which the 
courts called upon to enforce contracts made elsewhere, or to be per- 
formed elsewhere, or where the considération arises elsewhere, are to 
be governed. The only présent considération is with référence to the 
law of the forum as an élément in determining the law with référence 
to which the contract must be held to hâve been made. Necessarily 
the parties in entering into contracts must be assumed to give some con- 
sidération to the laws of the state in which the contract is to be en- 
forced. While it may not always be possible to détermine at the time 
of the making of the contract as to where it will be necessary to iiisti- 
tute suit, in case of a failure of the promisor to perform, yet the place 
of payment and the résidence of the payor, or the location of the land 
given as security, can very well be considered by the parties as prob- 
ably indicating the place of suit, in case suit should be necessary. In 
considération of thèse facts it should be held that the laws of such 
a state were necessarily in conteniplation by the parties, and nec- 
essarily an élément to be considered in determining the applicable 
law. 

"In gênerai, the law of the forum, beiiig also that of the place where the 
landed security lies, will prevail over the place of the contract to defeat the 
instrument." 8 Corpus Juris, § 165, p. 97 ; Flagg r. Baldwin, 38 N. J. Eq. 219, 
48 Am. Rep. 308. 

"While, as a gênerai rule, a contract valld where it Is made, or under the 
law with référence to which it is nmde, is valid everywhere, the courts of one 
state will not enforce a contract made in another, where to do so would. 



GEORGE V. OSCAK SMITH & SONS CD. 55 

be in violation of tlieir own statutes." International Harvester Co. v. McAdam, 
142 Wis. 114, 124 N. W. 1042, 26 L. R. A. (N. S.) 774, 20 Ann. Cas. 614. 

Application of the Facts. 

An effort will be made to apply the facts o£ this case to the law as 
announced in the foregoing propositions. V. L. Crawford, a citizen 
of Mississippi, was conducting a bleachery business at Meridian, in 
that State. The Smith Company, doing business in Pennsylvania under 
a New York charter, contracted to furnish Hnters to munition makers, 
and undertook to supply the linters through Crawford. Crawford's 
facihties being inadec^uate, the Smith Company made loans to him 
to enable him to carry out the contract with them. In December, 1914, 
while owing the Smith Company about $11,000 unsecured, Crawford 
applied for an additional loan of $10,000, offering his plant as security. 
During the course of negotiations, carried on by wire and mail, the ap- 
plication was increased to $25,000. As a part of thèse negotiations, 
Crawford offered réduction in the prices at which he was to furnish 
linters, one of thèse proposed réductions being in considération, not 
alone of the loan, but on account of delays which had taken place in 
deliveries. Some money was paid as the negotiations took place, and, 
before their consummation, officers of the Smith Company went to 
Meridian, investigated the property offered as security, and determined 
to make the loan, and then made a statement to that effect to Craw- 
ford. Crawford was authorized to exécute notes and a mortgage upon 
the property to be taken as security, the instruments being prepared 
by attorneys for the Smith Company in Meridian. The notes and deed 
of trust having been executed, they were sent through the mail by the 
bank at Meridian, with draft attached for the balance unpaid of the 
amount loaned, $9,700. The draft was paid and the notes and deed 
of trust taken up by the Smith Company at Philadelphia. 

The primary question in determining the law to which the contract 
îs referable is where the contract was made. 

The making of the contract consisted of a number of éléments, and 
thèse éléments did not ail hâve the same place. In the negotiations 
by mail, that which was done by Crawford had its locus at Meridian ; 
that which was done by the Smith Company had Philadelphia for its 
place. The verbal negotiations took place at Meridian; the représen- 
tatives of the Company there determined to make the loan. The formai 
action of the Smith Company was at Philadelphia. The deed of trust 
was executed at Meridian ; the property affected by the deed of trust 
was in Mississippi. The money was paid by drafts which were placed 
in bank in Meridian by Crawford, which drafts were transmitted 
through the mails to Philadelphia to another bank, where they were 
paid, and the proceeds paid over to Crawford in Meridian. The notes 
were executed in Meridian, transmitted by mail to Philadelphia, and 
there retained by the Smith Company. The deed of trust was trans- 
mitted by mail to Philadelphia, and returned by mail to Meridian for 
record. It would not be possible to name any one state in which this 
transaction took place. 

If it be possible, under the facts stated, to détermine, as matter of 
îaw, by the application of technical légal presumption, the place of the 



56 250 FEDERAL KEP0RT15U 

making of the contract, the circumstances are such as to make the 
place at which it might be said to hâve been consummated an unimpor- 
tant and almost immaterial matter. 

With référence to the place of the considération, almost the same 
difficulties appear. If the illegality of the contract may be referred to 
the considération, the same character of difficulty arises as in deter- 
mining the place where the contract was made. The charge of usury 
is based upon changes in contracts theretofore existing between the 
parties, which had been entered into, and which were to be performed 
in Mississippi. The changes were negotiated by wire and letters pass- 
ing between Meridian and Philadelphia, and by personal negotiations 
in Mississippi. So far as the actual payment of money is concerned, 
a part of it was already in possession of the maker of the notes in 
Mississippi when the contract was consummated ; the payment of the 
balance was through the banks and through the mail, the actual pro- 
cess of payment involving action in Mississippi and Pennsylvania and 
in ail of the states between. As to the original source from which 
the money came, the record is silent — whether New York, the légal rés- 
idence of the Smith Company, or Philadelphia, from which point the 
correspondence with Crawford was carried on, does not appear. If the 
considération was affected with usury by the demand of the Smith 
Company for interest in excess of that allowed by law, the same ques- 
tions arise as in determining where the contract was made, for the 
demand was made in both states and by mail and wire. It may or not 
be important that the propositions for the payment of money in excess 
of that permitted by law were primarily made by Crawford in Missis- 
sippi, and his final agreement with référence to them was there ex- 
pressed, and, so far as actually executed, executed there. 

The éléments which are definitely fixed in Mississippi are: (1) The 
place of performance — that is, the place where the notes were to be 
paid; and also the place where the déductions in price on contracts 
constituting usury were to be made was Mississippi. (2) The prop- 
erty upon which a lien was given to secure the payment of the principal 
and 6 per cent, of the interest was situate in Mississippi. (3) The 
money borrowed was borrowed for use in Mississippi, and it was ex- 
pected that it would be repaid out of the conduct of the business es- 
tablished there, into which the money was put. (4) It was contem- 
plated that, in case of nonperformance of the contract by the promisor, 
the remedy of the promisee would be in Mississippi. The deed of trust 
could not be made effective elsewhere than in that state; no personal 
judgment against Crawford could be secured except in that state; if 
procédure in the courts, rather than by the trustée, was found neces- 
sary, this procédure would necessarily be in Mississippi. 

While, as heretofore suggested, the mortgage is, in a sensé, an in- 
cident to the debt, yet it sometimes, as in the présent case, becomes the 
incident of paramount importance. The debt may be entirely valid, 
and yet entirely worthless without the security of the mortgage. That 
is the condition in this case. Except so far as the land secures it, 
the debt is without value. The contract would not hâve been made 
without the mortgage. Entirely regardless of any other principle 



GEORGE V. OSCAR SMITH & SONS CD. 57 

which inheres in that branch of the law, which is ordinarily spoken of 
as "conflict of laws," it is certainly the case that every contract with 
référence to land within any certain jurisdiction must hâve its validity, 
in so far as the land is concerned, tested by the laws of that jurisdiction. 

The only éléments that could possibly enter into the question as to 
the law with référence to which the contract was made that are not 
definitely fixed in Mississippi are the place of negotiations, which were 
conducted principally in Mississippi and through the mails and by wire ; 
the considération, the situs of which is indefinite ; and the place of the 
making of the contract every part of which had been in Mississippi, 
except the formai receipt of the évidences of debt by the promisees 
in Pennsylvania. 

The élément which has not been specifically considered is the inten- 
tion of the parties. The same circumstances which indicate the law 
with référence to which the contract should be determined carry with 
them the conclusion that it was the intention of the parties that the 
contract should be subject to the laws of Mississippi ; and therefore 
little is to be added to the argument by a statement to the efïect that 
the parties intended that it should be measured by the laws of that 
State. 

The maker of the notes in the présent case was, at the time of their 
exécution, a citizen of the state of Mississippi. The debt was secured 
by property which could be held nowhere other than in the state of 
Mississippi ; no relief, either by a proceeding in rem or in personam, 
could be had in any other state. The contract suggesting nothing to 
the contrary, it would appear to be reasonable to assume that the par- 
ties intended their rights to be determined by the laws of the only 
state which could be appealed to for a remedy. No référence was 
made in any of the correspondence, or in any verbal negotiations with 
référence to which there is testimony, to any fact indicating a pur- 
pose on the part of the negotiators to fix upon a place whose laws 
should measure their contract. în the absence of anything more defi- 
nite, it would seem that there are three factors in the présent case 
which might be taken into considération in an effort to détermine the 
law in contemplation by the parties : (1) The notes were made pay- 
able in Mississippi ; (2) the money was to be used in Mississippi ; (3) 
the debt was secured by property in Mississippi. It was known by 
ail of the parties to the transaction that the collection of the money, 
whether in the course of business or through the trustée, or through 
the courts, would hâve to be made in the state of Mississippi. It is 
not assumed that with a knowledge of this fact, and in the complète 
absence of anything so indicating, that the parties intended to make 
their Mississippi transaction dépendent upon, or in any sensé governed 
by, the laws of the state of Pennsylvania. A much more ordinary 
course of business is for bonds or bills and notes or other negotiable 
instruments to be made payable at the place of business of the parties 
lending the money or purchasing the negotiable instruments. When 
this ordinary course of business is departed from, that circumstance 
alone is not without weight in suggesting that the parties purposed to 



58 250 FEDERAL REPORTER 

make the place of payment the place whose laws should measure the 
obligations of the contract. 

There are a number of adjudicated cases where the place of the 
making of the contract and the source of the considération — that is,, 
the source of the money loaned — are not subject to the same uncer- 
tainty as in the présent case, where the conclusion has been reached 
that facts less convincing than those which appear in this case fix as 
the law of the contract the law of a state other than that of the mak- 
ing and of the considération. 

In Arnold v. Potter, 22 lowa, at page 198: Notes were dated in 
lowa; made payable in that state; the trustée resided there; the real 
estate security was situated there; the payor resided there; notes 
were negotiated in Massachusetts and the money there f urnished. The 
contract was held to be governed by the lowa law. 

In the case of Scott v. Fabacher, 176 Fed. 229, 100 C. C. A. 147,, 
the source of the considération — that is, the money loaned — was L,oui- 
siana, and the place of payment was Louisiana, and the negotiations 
were carried on partly by mail ; but the transaction in which the money 
was used, and out of which it was assumed the profits would arise 
justifying the payment of usury, and the land given as security for 
the payment of the principal and the usurious interest, were in Texas. 
Notwithstanding the fact that both the considération and the place 
of performance was a state other than Texas, the essential character 
of the transaction as a Texas contract was recognized, and the inter- 
est was forfeited under the laws of that state. 

Sheldon v. Haxtun, 91 N. Y. 128: The défendant, who resided in 
Illinois, collected money due to plaintiff, who resided in New York, 
from parties in Illinois, and, instead of remitting the proceeds, sent 
through the mail hjs own note for the amount, specifying a rate of in- 
terest usurious in New York. The court says : 

"Upon depositlng the notes In the mail the transaction was complète. 
* * * The défendant became the borrower of the proceeds of the notes 
collected by liim. The fact that one of the notes was expressly payable iu 
New York does not dlstinguish It, in the point of usury, from the others. 
This was an incidental clrcumstance, and does not overthrow the other déci- 
sive circumstances which make Illinois the place of contract." 

Staples V. Nott, 128 N. Y. 403, 28 N. E. 515, 26 Am. St. Rep. 480: 
The note was dated at Washington, made payable at a bank in New 
York, bearing interest illégal in New York given to take up another 
note dated at Washington and payable there. The arrangement for re- 
newal was made in Washington and the note drawn there ; it was there 
handed to the maker to exécute. He took it to his home in New York, 
where he signed it. The note was then mailed to plaintiff at Wash- 
ington. It was held that the contract evidenced by the note was made 
in and governed by the laws of the District of Columbia; that the 
affixing of signatures by maker and indorser was simply détails in the 
performance and exécution of the contract, which was consummated 
when the note was received by plaintiff; that the naming of a New 
York bank as the place of payment did not make it a New York con- 
tract. 



GEORGE V. OSCAR SMITH & SONS CO. 59 

Wayne County Savings Bank v. Low, 81 N. Y. 570, 37 Am. Rep. 
533 : Note was dated and made payable in New York, but was made 
■for the purpose of being used in renewal of another note for the same 
amount then held by plaintiff, a bank in Pennsylvania. It \yas actually 
written in Pennsylvania, in the form in use in that state, by the cashier 
of plaintiff, at the defendant's request, and forwarded to the défendant 
for signature, and signed by him in New York and mailed to plaintiff 
in Pennsylvania, together with a check for the discount. The note and 
interest were received by plaintiff in Pennsylvania, and ail was done in 
performance of a previous agreement entered into in Pennsylvania. 
Says the court: 

"It ennnot l)e contended that a party wlio goes into another state, and 
there makes an asreenient witli a citizen of that state for the loan * * * 
of money, lawful by the laws of that state, can render his obligation void by 
raalîing it payable in another state according to whose laws the contract 
would be usurious. Neither can it be claimed that because the obligation, 
instead of being signed in the state where the concract was made, is signed 
in another state and sent by mail to the place of contract, it must be governed 
by the usury laws of the place where it was signed." 

Martin v. Johnson, 84 Ga. 487, 10 S. E. 1092, 8 h. R. A. 170: The 
note was given for a larger amount than actually received ; was pay- 
able in Boston, f rom wliich place the money was sent. The court says : 

"The paroi agreement ont of which the notes sued on sprang was made In 
this state [Georgia]. Part of that agreement was performed in this state. 
The usury set forth in defendant's pleas was paid in this state; and ail that 
was left to be performed of that agreement was the payment of the notes 
sued on in this state. The maker of thèse notes résides in this state, and the 
land which was conveyed as seeurity is located in this state. Whether a con- 
tract is made with référence to the place, or state, or country in which it is 
to be performed is a question of no easy solution. However this may be, 
there is enough in this case to show that, in ail likelihood, the parties to the 
contract sued on contemplated the law of the domicile of the maker as the 
law which should govern this contract in ail respects." 

In Kilcrease v. Johnson, 85 Ga. 600, 11 S. E. 870, upon similar facts 
a like ruling was made. 

United States Saving & Loan Ass'n v. Scott, 98 Ky. 695, 34 S. W. 
235 : The note was dated at St. Paul, Minn., was payable at Minne- 
apolis, and contained a provision to the effect that it was understood 
to be made with référence to and under the laws of the state of Min- 
nesota. It was given, however, to a building and loan association do- 
ing business in Kentucky under a permit, and represented by agencies 
to solicit and transact business, and the maker of the note became a 
member of the association there. The note was secured by a mortgage 
on real estate in Kentucky. It was held to be a Kentucky contract and 
void as usurious. 

Southern Building & Eoan Ass'n v. Harris, 98 Ky. 41, 32 S. W. 262 : 
The loan was made at Knoxville, Tenn., to a résident of Kentucky, and 
the notes were made payable at Knoxville. The court says : 

"The subscription for stock • * • x\7as made in Kentucky; the appli- 
cation for the loan written and signed hère ; the note dated, written, and 
signed hère, and the mortgage made to secure the payments for this stock ; 



60 250 FEDERAL REPORTER 

and thus the payment of the loan made was written, dated, executed, ac- 
knowledged, and recorded in Fayette county, Ky." 

The court held the notes usurious under the laws of Kentucky, and 
refused judgment upon them. 

Kellog V. Miller (C. C.) 13 Fed. 198: Though the contract was ne- 
gotiated in New York, and the lender a citizen of that state, and the 
money there paid, it was held to be a Nebraska contract, because exe- 
cuted in that state, and secured by a mortgage on land there, the ob- 
liger being a résident of that state, notwithstanding no place of per- 
formance was named. 

Rowland v. Bldg. & Loan Ass'n, 115 N. C. 825, 18 S. E. 965 : The 
obligation for the money was sent to the office of the association in 
Richmond, Va., and the money was sent f rom that place. The borrow- 
er, howevei", was a résident of North Carolina, and made his applica- 
tion from that state. The money was paid to him there, he secured the 
payment by a mortgage on land situated there, and the mortgage was 
executed there. The obligation was held usurious, notwithstanding it 
was vaHd under the laws of Virginia. 

Duncan v. Helm, 22 La. Ann. 418: The parties resided in Missis- 
sippi, where the negotiations were had. The notes were payable in 
Louisiana, and secured by a mortgage on lands there situate. The 
actual exécution was in Louisiana, and they were there delivered to 
the représentative of the lender, by whom the money was paid by a 
bill on New Orléans. The contract was held to hâve been intended to 
hâve effect in Louisiana. 

Falls V. U. S. Company, 97 Ala. 417, 13 South. 25, 24 L. R. A. 174, 
38 Am. St. Rep. 194 : The note was payable in Minnesota, and recited 
that it was made with référence to the laws of that state. It was se- 
cured by a mortgage on land in Alabama, and drew a rate of interest 
in excess of that permitted in that state. The obligation was made 
through a local agent of the complainant in Alabama, and the money re- 
ceived from Minnesota was paid in Alabama. The court held that no 
state will enforce contracts or redress grievances entered into or suf- 
fered in another state, if the enforcement involve a breach of légal or 
moral right asmaintained in the law of the forum, and refused to en- 
force the contract as to so much of it as was in conflict with the law 
of Alabama. 

Thompson v. Edwards, 85 Ind. 420: The Suprême Court cited and 
approved Rorer on Interstate Law, to the efïect that a note made in 
one state, secured by a mortgage on lands in another, made for money 
loaned by a citizen of a third state, and delivered to him in the state 
where the contract of loan was agreed to, was held to be légal and en- 
forceable in the courts of the state where the land was situate, and 
where the debtor resided at the time of making the contract, although 
a greater rate of interest was called for than allowed by the law of the 
state where the contract was agreed on and the instrument delivered, 
although in such latter state a forfeiture of the debt is incurred for 
usury ; the ruling being that the whole transaction had référence to the 
laws of the state where the land was situate, the debtor resided, and the 



GEORGE V. OSCAR SMITH & SONS CO. 61 

instruments made, although the instruments were delivered elsewhere, 
and notwithstanding, also, that the notes were made payable in a still 
différent state than that wherein they were given or delivered, or 
wherein either party resided. 

Contract Illégal in Place of Making and Performance. 
In Miller v. Tiffany, 1 Wall. 298, 17 h. Ed. 540, it is said: 
"The gênerai princiiîle in relation to contracts made in one place to be per- 
formed in another is well settled. They aro to he governed by the law of 
the place of performance, and, if the interest allowed by the law of the 
place of performance is higber than that permitted at the place of contract, 
the parties may stipulate for the higher interest without incurrinj,' tlie penal- 
ties of usury. The converse of this proposition is also well settled. If the 
rate of interest be higher at the place of the contract than at the place of 
performance, the parties may lawfully contract, in that case also, for the 
higher rate." 

See, also, Bedford v. Eastern Bldg. & Loan Ass'n, 181 U. S. 243, 21 
Sup. Ct. 597, 45 L. Ed. 834; R. R. Co. v. Ashland, 12 Wall. 226, 20 
L..Ed. 385; Scotland County v. Hill, 132 U. S. 107, 10 Sup. Ct. 26, 33 
L. Ed. 261 ; Cromwell v. Sac County, 96 U. S. 57, 24 E. Ed. 681 ; 
Cockle V. Flack, 93 U. S. 344, 33 E. Ed. 949. 

The principles just stated are not universally recognized, or, at least, 
not applicable in ail cases, as indicated by the cases just reviewed. 
L^ndoubtedly, the courts will go far to defeat the claim of usury, espe- 
cially where the conséquences are completely fatal to the contract. 

Where the contract conflicts, both with the law where it was made 
and the law where it is to be perfornied, the principles just announced 
can hâve no application, and it becomes increasingly difficult and in- 
creasingly important to détermine the law with référence to which it 
was made. 

The contract hère under considération is, in part, at least, invalid, 
both under the laws of Pennsylvania and under the laws of Missis- 
sippi. In both States a rate of interest is fixed which it is illégal to ex- 
ceed. 

Where the conséquences of the infraction of the law in the place of 
the making are comparatively unimportant, and the conséquences in 
the place in which the contract is to be performed are the complète 
avoidance of the contract, it is not to be assumed that the courts of the 
place of performance, if they are also those of the place of the remedy, 
will acquiesce in the limited conséquences of the law of the place of 
the making of the contract. 

"The law, however, is usually thus stated: When the contract is found to 
be usurioiis, both by the law of the state where it is made and by that In 
whleli it is payable, the parties are law-breakers in any event, and can scaree- 
ly be allowed to choose their own penalties. By the wei};ht of authorlty the 
gênerai rule applies that the law of the place of the contract governs." 3i> 
("yc. p. 908. U. S. Mortgage Co. v. Sperry (C. O.) 24 Yed. KÏS; Jewell v. 
Wright, 30 N. Y. 259, 80 Am. Dec. 372. 

The proposition that where a contract is usurious, both by the law 
of the place where the note is made and of the place where it is to be 
paid, the conséquences are to be measured by the law of the place of 



62 250 FEDERAL REPORTER 

making, îs based upon expressions in Andrews v. Pond, 13 Pet. 75, 10 
L. Ed. 61. This is not a proper inference from the cited case. The 
language there is as f ollows : 

"Now if this défense is true (that is, that usury was concealed under the 
naine of exchange, in order to évade the law), the question is not which law 
is to govern in executing the contract (that is, the law of New York, where 
the bill of exchange was drawn, or of Alabama, where it was to be paid), but 
which is to décide the fate of a security taken upon an usurious agreement, 
which nelther will exécute. Unquestionably it must be tlie law of the state 
where the agreement was made and the instrument taken to secure its per- 
formance. A contract of this kind stands ou the same prlnciples wlth a 
bona fide agreement made in one place to be executed in another. In the 
last-mentioned cases the agreements are permitted by the les locl contractas, 
and will even be enforced there If the party is found within its jurlsdlction. 
But the same rule cannot be applied to contracts forbidden by its laws and 
designed to évade theni. In such cases the légal conséquences of such an 
agreement must be decided by the law of the place where the contract is 
made. If void there, It Is ^oid every where ; and the cases referred to in 
Story's Conflict of Laws, 203, fully establish this doctrine." 

It is manifest that if the agreement is void on account of the law 
of the place where it is made, and not saved from illegahty by the cir- 
cumstance that it was the bona fide intention of the parties for the con- 
tract to be perf ormed elsewhere, or otherwise, it can hâve no effect as 
a contract, and the conséquence arises ont of the law of the place of 
making, and must hâve its effect everywhere. Frequently, however, 
the laws with référence to usury présent cases where, though the con- 
tract may be in violation of the law of the state in which it is made, 
and also in violation of the law of the state in which it is to be per- 
formed, the contract cannot be said to be void in either state. It 
merely has conséquences différent from those contemplated by the 
parties. For instance, it is sometimes the case that the state in which 
the contract is made will enforce the contract, except as to the exces- 
sive interest; and that in the state in which the contract is to be per- 
formed the law will enforce the contract as to the principal, but will 
not permit the recovery of any part of the interest. In such a case the 
reason upon which the rule in Andrews v. Pond is predicated does not 
exist. The contract cannot be said to be void by the laws of the state 
in which it was made ; theref ore the conséquences which f ollow from 
voidness do not resuit in that state nor elsewhere. The gênerai prop- 
osition is that if the note be given in one state, where it would be valid, 
but is to be performed in another, where the contract would be usuri- 
ous, it would be governed by the laws of the latter state. It would be 
an absurd conséquence to suggest that where the laws of the state 
where the contract is made provide for a forfeiture of a part of thé 
contracted interest, that forfeiture would alone take place, and that the 
larger forfeiture, resulting from the laws of the place of payment, 
would not take place ; but that, if the contract were entirely valid in 
the state in which it is made, the larger forfeiture of the state in 
which payment is to be made would resuit. In other words, the con- 
séquences in the case assumed would be more serions if the contract 
was made in a state where it would be entirely vahd than in the state 
where the laws would forfeit a part of the interest. A spécifie appli- 



GEOEGE V. OSCAR SMITH & SONS CO. 63 

cation to the facts of the présent case still more clearly shows the il- 
logical results of the proposition. It will be assumed that the interest 
contractée] for in this case exceeds 20 per cent. Under the proposition 
criticized, and assuming that the contract vvas made in Pennsylvania, 
the Pennsylvania law providing for a forfeiture of the excess interest^ 
the interest to the extent of 12 per cent, would be forfeited, and no 
other conséquences would follow. If, however, the laws of Pennsyl- 
vania had permitted the making of the contract, the resuit would be 
that the law of the state of Mississippi, where the payment was to be 
made, would apply, and that law providing that if the interest is as 
much as 20 per cent, the entire debt is to be forfeited, the resuit would 
be that the plaintifï would lose ail of his debt. The conséquences are 
absurdly illogical. 

The rule, however, as announced in Andrews v. Pond is entirely 
logical. If the contract is void it is necessarily void everywhere, and 
no conséquences, other than those which resuit from the absence of a 
contract, could take place where the agreement was made or else- 
where. 

A considération of the facts hereinbefore recited, and of the author- 
ities noted and many others, leads to the conclusion that the contract 
hère under investigation should be held made with référence to the laws 
of Mississippi, and the laws of that state should govern in determining 
the rights of the parties to this suit. 

Enforcement of Usury Laws by Pederal Courts. 

Courts of one state will not enforce or otherwise administer the 
criminal statutes of another ; nor will the courts of the United States 
enforce any criminal statutes, except those of the United States. Thèse 
propositions must be limited by their application to the relations be- 
tween the state and the person accused of violating her laws. As be- 
tween two individuals whose contractual relations are afïected by the 
criminal statutes of the state, the courts of another state, or the courts 
of the United States, will administer the resulting légal rights as they 
would rights arising in any other way. To illustrate : If the criminal 
statutes of the state forbid the doing of a certain thing, and a contract 
is entered into between individuals in violation of such a statute, the 
statute will be taken into considération by the courts of another state 
having jurisdiction of the subject-matter, or by the courts of the United 
States, in a case within their jurisdiction. It may be that the resuit of 
the criminal statute would be to make the contract under considéra- 
tion void; if so, the court of the other state or of the United States 
would so déclare. It may be that the criminal statute would hâve a 
lesser efifect by declaring the contract void in part, and indicating the 
extent, in which case the remedy would be commensurate with the 
right. 

The principles which hâve thus been announced hâve peculiar ap- 
plication to the laws of usury. In a number of states the receipt of 
usurious interest is made a crime and punished as such. Such a pun- 
ishment will, of course, be inflicted alone by the state passing the law. 
If in such a state, no other conséquences being indicated than the pun- 
ishment of the persons entering into the usurious contract, such a con- 



64 250 FEDERAL REPORTER 

tract was under considération by a fédéral court or the courts of an- 
other State, the contract would be regarded as and declared to be void ; 
and a person suing upon such a contract would, in the fédéral court or 
the court of the other state, be refused relief upon his contract. If, 
however, the usury laws of the state did not stop with a mère déclara- 
tion of the criminal character of such contracts, but undertook to in- 
dicate what would be the resuit upon the contract itself, this latter 
provision would ûx and détermine the rights of the parties and the 
fédéral courts or the courts of another state having before them such 
rights would accordingly adjudicate. In the instant case the parties 
hâve by their contracts fixed their rights as between each other. If 
the contracts are usurious, thèse rights are not as declared in the in- 
struments which hâve passed between them, but are modified by the 
laws of the state to which those contracts are subject. The courts of 
the United States having jurisdiction of the parties will administer 
their rights as thèse rights hâve been fixed by the laws of the state 
under which the contract was made. 

The conclusion having heretofore been reached that the contract un- 
der considération should be governed by the laws of the state of Mis- 
sissippi, the next inquiry which arises is whether the contract is usuri- 
ous, and the extent to which it is usurious. In determining whether or 
not the contract is usurious, the inclination of courts is to assume that 
the parties did not intend to violate the law. The instrument will be so 
construed as to save the contract from illegality if possible. If the 
facts which are assumed to constitute usury are outside of the written 
instrument, such a construction or interprétation of them will be giv- 
en as will, if possible, bring about a like resuit. Thèse rules, however, 
will not be permitted to négative the plain language and purpose of 
the law ; nor will the mère absence of an intent to violate the law ex- 
cuse the persons entering into the usurious contract from the consé- 
quences of acts which constitute a violation of the law. In order to 
constitute usury, it is not necessary to hâve a corrupt intent as distin- 
guished from the intent presumed from the acts which constitute the 
usury. Applying thèse rules to the instant case, it may very well be 
concluded that there was no intention upon the part of Oscar Smith 
& Sons Company to violate the law. There was no corrupt purpose in 
the doing of that which is hère under investigation. This is indicated 
by the manner in which the parties hâve testified. Nevertheless it is 
the fact that they hâve received, as compensation for the use of money, 
values in excess of the rate which may be charged in Mississippi with- 
out violating the law. They intended to do the things which constitute 
a violation of the Mississippi law, and they are therefore chargeable 
with the illégal intent contemplated by the usury statute. 

The extent to which usury has been contracted for becomes the next 
question. If the interest exceeds 10 per cent., but does not exceed 20 
per cent-, the conséquence of the usurious contract is that ail interest 
wil! be lost. If the interest contracted for is 20 per cent, or more, the 
entire debt is lost. That is to say, if the parties hâve entered into a 
contract by which the promisee is to receive for l^ie use or forbear- 
ance of money a sum equal to or in excess of 20 per cent, per annum 



GEOKGE V. OSCAR SMITH & SONS CO. 65 

of the amount borrowed, there can be no recovery by the promisee; 
and if anything bas been paid upon the contract, the promisor can 
recover. 

When the negotiations were begun between Crawf ord and the Smith 
Company which resuUed in the loan by the latter of $25,000 to the for- 
mer, Crawford was already indebted to the Smith Company in the 
amount of about $11,000. There was also subsisting between them at 
the time two contracts, one to the effect that Crawford would do the 
bleaching for the Smith Company of the linters required by the latter 
for fîlHng the contract with the Dupont Company at 3% cents per 
pound, and a contract by which Crawford would furnish to the Smith 
Company linters to carry out a contract of the Smith Company with 
the Anglo- American Cotton Products Company at 11% cents per 
pound. There was also a controversy between them as to responsi- 
bility for damages to a shipment of linters. It appears also that there 
had been delays in the fîlling of the Dupont contract, for which Craw- 
ford was responsible. When he began the negotiations for the loan 
of money, he suggested that he would reduce the price of the linters to 
be used in fîlling the Dupont contract one-fourth cent per pound, and 
that he would discharge the claim for the damaged linters, amounting 
to about $225. The price concession, according to a letter from Craw- 
ford, was "in appréciation of your good' offices." He further wrote: 

"I am offering, in the nature of a Personal appréciation of your services, 
and to further eompensate fpr the famous delay in Dupont production, to 
make a réduction of Vt c. per pound." 

Crawford was then applying for a loan of $10,000. Subsequently, 
when he undertook to increase the amount of the loan, he proposed to 
make a déduction of one-fourth cent per pound on the linters required 
to fill the American Products Company contract as a part of the com- 
pensation to the Smith Company for the money. The Smith Company, 
in agreeing to make the loan, suggested that, in so far as the Dupont 
contract was concerned, the concession ought to extend to linters 
bleached in December, the différence in the price amounting to some- 
thing in excess of $500. As a part of the negotiations the parties cor- 
responded with référence to the discharge of the debt then existing, 
and it was first proposed by Crawford that it be discharged by making 
déduction of $200 from each draft attached to bills of lading for lin- 
ters shipped to the Smith Company. The amount of this was subse- 
quently reduced to $100 for each shipment. 

Counsel for the Smith Company insists that the déductions made 
from the drafts attached to the bills of lading were the same as the 
concessions made in the price of linters to be furnished upon the Du- 
pont and American Products Company contracts, and they insist that 
thèse concessions upon the price were applied to the discharge of the 
previous indebtedness and were not inducements to the new loan. But 
this court is, of course, compelled to détermine cases upon the records; 
and it would be entirely impossible for any one to study the record and 
conclude that the déductions made from the drafts attached to the bills 
of lading and the concessions made with regard to the price are the 
250 F.— 5 



66 250 ffEDEHAL KBPOETER 

same. If the facts are as appellees' counsel insist, the évidence has 
been unhappily placed before the court. 

Applying the rules with référence to the attitude of courts towards 
usurious contracts, it should be held that the allowance of the claim 
of $225 was upon the merits of the claim, and had no relation to com- 
pensation for the use of the money. In making the proposai to re- 
duce the price of the linters to fulfill the 'Dupont contract, Crawford 
included as the reason for making the concession, not alone the making 
of the new loan, but compensation for the delay in filling the Dupont 
contract. There is no way of determining how much of this is ref- 
erable to the one and how much to the other ; and, applying again the 
rules just referred to, the whole of the item should be rejected as 
compensation for the use of the money. The concession on the Amer- 
ican Products Company contract had no relation to anything except 
the new loan. The amount of linters to be furnished under this con- 
tract was definite, and the time within which it was to be furnished 
was definite, and the amount which was to be paid by the Smith Com- 
pany under the contract as it had been and as it was, as the resuit of 
negotiations for the loan, was susceptible of definite détermination. 
This amount, $1,200, should be regarded in determining the extent to 
which usury entered into the contract. The items to be considered, 
then, would be the 6 per cent, interest provided for in terms by the 
written contract, and the amount of $1,200, agreed to be deducted on 
this contract. The circumstance that the contract was not carried out, 
and that no déduction in fact was made, is entirely immaterial, as usury 
is predicated, not upon payments of excessive interest, but upon the 
contracts to pay. 

Counsel for the parties hâve disagreed as to the manner in which 
the calculation should be made in determining whether or not usury 
was paid or contracted to be paid. There should be uo difficulty about 
this. The contract provides for the payment of $2,000 in two months, 
$2,000 in three months, and $3,000 each month thereafter to the tenth 
month. In addition, interest was actually paid on the money advanced 
prior to the exécution of the notes and deed of trust. By adding to 
the interest payable on the notes f rom date until maturity the interest 
actually paid and the $1,200 promised to be paid on the American 
Products Company contract, the total amount chargeable as interest 
may be ascertained. If, calculating at the rate of 20 per cent, per an- 
num from the same dates to the same maturities (including the period 
covered by the advances as to the amount of the advances), the amount 
ascertained is in excess of the interest stipulated in the note, plus the 
interest paid on advances, and plus the $1,200, the interest provided 
by the contract will be less than the 20 per cent, necessary to avoid 
the contract. If, calculating interest at 10 per cent, from the same 
dates to the same maturities, the aniount ascertained is less than the 
stipulated rate, plus interest paid on advances, and plus the $1,200, 
then the légal rate will be exceeded, and no interest will be recoverable 
under the law. The interest as stipulated amounted to $785. The 
only interest paid on advances which the record disclosed is $85. The 
interest stipulated, the interest paid on advances, and the $1,200 amount 



AKTIESELSKABET 8TAVANQEEEN V. HUBBAKD-Z. S. S. CO. 67 

to $2,160; the interest, calculated at 10 per cent., is $1,616.66; the 
interest, calculated at 20 per cent., is $3,233.33. It is apparent that 
the amount contracted to be paid by Crawford to the Smith Company- 
for the use of the money (eliminating the items paid partially for some 
reason other than the use of the money) amounts to more than 10 per 
cent, and is less than 20 per cent., and the resuit is that there should 
be no recovery for interest; and that, in fixing the amount due and 
secured by the deed of trust, ail interest stipulated for should be elim- 
inated, and ail interest actually paid on the advances and on the notes 
paid should be deducted. 

The cause should be remanded for proceedings in conformity here- 
with. 



AKTIESELSKABKT STAVANGEREN v. HUBBARD-ZEMURRAT S. S. CO. 

(Circuit Court of Appeals, Fifth Circuit. March 25, 1918.) 

No. 3148. 

1. SniPPiNG <te=>4,'î — Chartfr Partif.s — Damage — Amount Recoveirable— 

Mattees Within Contemplation of Party. 

Wtiere a time charter allowed the charterer to direct the vessel's move- 
ments, and there was no undertalàng by the owner to make any particular 
voyage, or to dellver a cargo within a stated time, losses suffered by the 
charterer on account of delay in delivering a particular cargo, intended 
for a holiday market, are not within the contemplation of the parties, 
and cannot be recovered, although the owner was responsible for the de- 
lay, which was due to the fault of the crew it provlded. 

2. Stipulations ©=14(1) — Construction — Effect. 

Where a charterer, libeled for a balance claimed to be due under 
charter party, flled a cross-libel, setting up damages on account of de- 
layed delivery of a cargo, resulting from accident to the vessel, a stipula- 
tion that as a resuit of the accident the charterer was damaged in a 
specified sum is not an admission of the owner's liability for such dam- 
ages. 

3. Shipfing <S=>50— Charter Party — Duty or Construction. 

Where a charter party required the owner to maintaln the vessel In a 
thoroughly efficient state in huU and machinery, the charterer is entitled 
to reimbursement for assistance rendered in mailing repairs, which it 
was the duty of the owner to make. 

Appeal from the District Court of the United States for the Eastern 
District of Douisiana; Rufus E. Foster, Judge. 

Libel by the Aktieselskabet Stavangeren against the Hubbard-Ze- 
murray Steamship Company, which filed a cross-libel. From a decree 
for libelant for the amount claimed, but for larger amount in favor 
of respondent on the cross-libel, libelant appeals. Modified and af- 
firmed. 

George H. Terriberry, of New Orléans, La., for appellant. 
Solomon Wolff, of New Orléans, La., for appellee. 

Before FARDEE, WAEKER, and BATTS, Circuit Judges. 

\A/'ALKER, Circuit Judge. The appellant, tiie owner of the Nor- 
wegian steamship Stavangeren, filed its libel in admiralty against the 

^SjPoi other cases see same topic & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexes 



68 250 FEDEliAL REPORTER 

appellee, the Hubbard-Zemurray Steamship Company, claiming $693.- 
40, the balance alleged to be due the appellant from the appellee under 
a time charter for the hire of the vessel by the appellee. The appellee 
filed an answer and cross-libel, which admitted that the amount claim- 
ed in the libel was due, but claimed that the appellee was damaged in 
the sum of $4,154.14 as the resuit of the delay of the vessel, when 
loaded with a cargo of bananas and cocoanuts, at Omoa, Honduras, 
bound for New Orléans, which delay was attributed to alleged nég- 
ligence of the vessel's master and crew, resulting in an injury to the 
vessel, which had to be repaired before it could proceed on its voyage. 
The averments of the cross-libel showed that the items of damages 
it claimed were $100, the alleged value of services rendered by ap- 
pellee's employés, which were necessary to enable the vessel to pro- 
ceed with her voyage, and $4,054.14, the différence between what the 
bananas and cocoanuts were sold for in the New Orléans market and 
what the appellee would hâve received for them if advance orders for 
them, which had been given, had not been canceled because of the 
delay in their arrivai. By its answer to the cross-libel appellant de- 
nied that it was indebted to the appellee in the sum claimed in the 
cross-libel, or in any sum whatsoever, and set up that under clauses 
and exceptions in the charter party, particularly clause No. 3 and clause 
No. 19, it was not responsible for damages resulting from the accident 
alleged in the cross-libel, even though that accident was caused by the 
mistake of the engineer in executing an order from the bridge. 

The case was tried on an agreed statement of facts, which disclosed 
the following: 

The ship had completed loading at Omoa a cargo of bananas and cocoanuts 
and at 12:30 a. m. of Friday, December 11, 1914, had started to leave that 
port for New Orléans, when, shortly after casting ott' her nioorlngs, her rud- 
der post was broken as a resuit of the engineer's failure properly to comply 
with an order signaled to him by the master. This neeessltated the making of 
repairs, with the resuit that the ship did not leave Omoa until 11 p. m. Sunday, 
December 13, 1914. It arrlved at New Orléans at 3 p. m. of December 18th, 
whereas it probably would hâve arrived there at about 3 p. m. of December 
15th, If it had not met with the mlshap at Omoa. Persons employed by the 
charterer assisted In making the required repairs. 

"XII. It is agreed that, it any sum Is due to respondent and cross-Ubelant 
for work done In repalrlng the vessel, the value of such vvork Is flfty dol- 
lars (.¥50.00). » * * " 

"XIV. While the ship was undergoing repairs at Omoa, from 12:30 p. m. of 
December 11, 1914, to 11 p. m. of December 13, 1914, 2 days and 221^ hours' 
hire of the ship was deducted by respondeut and cross-libelant, in accordance 
with the charter party. 

"XV. Cross-libelant had the entlre reach of the ship, and ail the fruit shlp- 
ped on the vessel was the property of the cross-libelant. 

"XVI. As a resuit of the accident to the ship, cross-libelant was damaged 
in the sum of $4,104.14, which includes $50 meutioned In article XII hereof." 

What has been set ont includes ail that was before the court bearing 
upon the claims to damages asserted by the cross-libel. There was 
judgment, under the libel, in favor of the appellant and against the 
appellee for $693.40, with 5 per cent, per annum interest from judi- 
cial demand until paid, and costs of court, and judgment under the 
cross-libel, in favor of the appellee against the appellant, in the sum 



AKTIESELSKABET STAVANGEREN V. HUBBARD-Z. S. S. CO. 69 

of $4,104.14, with 5 per cent, per annum interest from judicial de- 
mand until paid, and ail costs of suit. 

[1] The provisions of the charter party, which constitute some of 
the grounds relied upon by appellant's counsel to defeat the claims of 
damages asserted by the cross-libel, are the foUowing: 

"3. That in the event of loss of time from deficiency of men or stores, break- 
down of machinery. or damage preventing the working of the steamer for more 
than 24 hours at sea, the payment of hire shall cease untll she be agaln in an 
eftieient state to résume her service, redelivered at place of accident, or al- 
lowance therefor; and should she in conséquence put into any port other 
than that to which she is bound, the port charges and pilotages at such port 
shall be borne by steamer's owners. Also if auy loss of time from crew or 
stores uot being on board in time, or from repairs to huU and machinery, 
which are for owners' account, not being complète after cargo and coals are 
on board and hour of saillng has been flxed by charterers, and notice given to 
captain, the time is lost to the owners' account. Steamer to be allowed one 
to two days every four months for cleaning boilers wlthout loss of hire." 

"19. That, should vessel be lost, any hire paid in advance and not earned 
(reckoning from the date of her loss) .shall be returned to the charterers with 
6 per cent, interest from date of loss ; the act of God, the king's eneiiiies, 
tire, restraints of princes, rulers, and people, and ail other dangers und 
accidents of the seas, rivers, machinery, boilers, and steam navigation 
throughout thls charter party, always excepted." 

It seems that the only subject dealt with in clause 19 is the obligation 
of the owner, in the event of the loss of the vessel, to repay, with in- 
terest, what had been paid in advance and was not earned, and that 
this provision has no bearing on the question of the owner's liability 
to the charterer for the vessel's loss of time, whatever may be the 
cause of it. Clause 3 deals specifically with that subject. It seems 
that that clause so provided for the case of loss of time from damage, 
including such as is attributable to négligence of the owner's engineer, 
preventing the working of the vessel for more than 24 hours at sea, as 
to make the cessation of hire, until the vessel is again in efficient state 
to résume her service, the agreed compensation the charterer was to be 
entitled to for a loss of time so occasioned, and that the appellee, hav- 
ing received the benefit of a compliance with that provision, was not 
entitled to anything more because of loss of time so caused. 

But it may be assumed, without being decided, that neither of the 
provisions quoted stands in the way of the appellee's recovery of any 
damages claimed in the cross-libel. It failed to show the existence of 
a state of facts entitling it to recover from the appellee the différence 
between what the cargo sold for and what it would hâve brought if 
most of the advance orders for parts of it had not been canceled be- 
cause of the delayed arrivai. The appellant hired the vessel, manned 
by its ofhcers and crew, for a specified time, to be employed, on condi- 
tions stated, in carrying lawful merchandise and passengers between 
any safe ports in stated parts of the world, as directed by the charterer 
or its agents. It did not undertake to make the particular voyage in 
which the delay in question occurred. It did not obligate itself to de- 
liver the cargo of bananas and cocoanuts at New Orléans within any 
stated time. 

Furthermore, the losses due to the cancellation of advance orders 



70 250 FEDERAL REPORTER 

and the missing of the Christmas holidays trade were what is known as 
spécial damages, which arise from circumstances peculiar to the par- 
ticular case, and which are not recoverable, unless those circumstances 
were communicated to or known by the party sought to' be charged at 
the time the côntract was made. 8 Ruling Case Law, 459-461 ; 10 
Corpus Juris, 324. It waS; not proved or admitted that the appellant 
was apprized of such circumstances, either when the côntract of hiring 
was made, or prior to the breaking of the rudder post at Omoa, or 
indeed at any time before the loss was sustained. The damages result- 
ing by reason of the existence of such spécial circumstances, of which 
the party sought to be charged was not made aware, are disallowed, 
not because they are merely consequential or remote, but because they 
cannot fairly be considered as having been within the contemplation of 
the parties at the time of entering into the côntract. Griffin v. Colver, 
16 N. Y. 489, 69 Am. Dec. 718. 

[2] The answer to the cross-libel put in issue the claims it asserted. 
The stipulation entered into, so far as it touched the matter of damag- 
es claimed in the cross-libel, was no more than an admission that, "as 
a resuit of the accident to the ship, cross-libelant was damaged in the 
sum of $4,104.14, which includes $50 mentioned" in a clause of the 
stipulation which stated the value of the service rendered by the appel- 
lee's employés in repair ing the injury caused by the mishap. Evident- 
ly, $4,054.14 of the admitted damage was the dififerencg stated in the 
cross-Hbel between what the cargo sold for and what would hâve been 
received for it, if the advance orders which had been given had not 
been canceled because of the delay in the vessel's arrivai at New Or- 
léans. But it was not admitted or proved that the appellant was an- 
swerable for those damages, or that the appellee sustained them under 
such circumstances as to be entitled to charge the appellant with lia- 
bility for them. This item of damage was admitted, but a state of 
tacts under which the appellant would be liable for it was neither ad- 
mitted nor otherwise shown. 

[3] The conclusion is that the decree rendered on the cross-libel was 
erroneous, in so far as the principal sum adjudged in favor of the ap- 
pellee exceeded $50. The charter party made it the duty of the owner 
to maintain the vessel "in a thoroughly efficient state in hull and ma- 
chinery for and during the services." This made the expense of re- 
pairs necessitated by the mishap at Omoa one to be borne by the owner. 
In making those repairs,, the charterer (the appellee) contributed serv- 
ices, the value of which was agreed to be $50. That amount was prop- 
erly adjudged in its favor. 

The decree rendered) on the cross-libel is modified, by making the 
principal sum adjudged in favor of the appellee against the appellant 
$50, instead of $4,104.14, and, as so modified, it is affirmed, with costs 
against the appellee. 

Modified and affirmed. 



THE TEANSIT 71' 

THE TRANSIT. 

(Circuit Court of Appeals, Third Circuit April 4, 1918.) 

No. 2338. 

1. Shippixg <S=342 — Chaeteb — Warrantt of Sbawobthiness. 

Thougli a charter of a vessel for 30 days was a démise, and was en- 
tered into after a more or less tliorougti inspection by an agent of tlie 
cliarterer, the owner was not relieved of bis implied warranty as to 
seaworthiness concerning a defect iiv tlie rudder port sleeve and in tlie 
timbers coneealed by it, for tbe rule of caveat emptor applies only to 
defects which are patent or are discoverable on inspection. 

2. SuiPPiNG <Ê=»58(2) — ^Peestjmpiions — Unseawoethiness, 

A presumption of unseawortbiness arises, and alone will sustain a re- 
covery, wbere a vessel sinks from an unltnown cause, under circum- 
stances wbere sbe bad been subjected to no external perU, and nothing but 
ber unseawortbiness eau explain the accident. 

3. SiiiPPiNG (S=>58(2) — SiNKiNG OF Vessei^ — Evidence. 

On a libel to recover damages for injury to the cargo of a lighter, 
which sank at her dock, évidence held insuHicient to show that tbe sinUing 
was tbe resuit of tbe vessel's unseawortbiness. 

Appeal from the District Court of the United States for the District 
of New Jersey; J. Warren Davis, Judge. 

Libel by the Atlantic Lighterage Corporation against the steam 
lighter Transit, her boilers, etc., claimed by Royal L. Sidnam. From 
a decree dismissing the libel, libelant appeals. Affirmed. 

Meyer Eichman, of West Hoboken, N. J., and Foley & Martin, of 
New York City (William J. Martin and George V. A. McCloskey, 
both of New York City, of counsel), for appellant. 

Macklin, Brown & Purdy, of New York City (William F. Purdy, 
of New York City, of counsel), for appellee. 

Before BUFFINGTON, McPHERSON, and WOOLLEY, Circuit 
Judges. 

WOOLLEY, Circuit Judge. The steam lighter "Transit" sank at 
her dock early on the morning of September 12, 1916. The charterer, 
as bailee of the cargo, filed this libel to recover damages for injury 
to the cargo. The District Court dismissed the hbel. The libelant 
appealed. 

The action was brought on the warranty of seaworthiness implied 
in the charter, Work v. Leathers, 97 U. S. 379, 24 L. Ed. 1012; the 
libelant alleging that the vessel was unseaworthy and that her un- 
seawortbiness caused her to sink. The claimant admitted the war- 
ranty but denied liability upon the ground that the charter was a de- 
mise of the vessel, and that, in a charter of démise, the rule of caveat 
emptor applies and relieves the owner from the warranty as to de- 
fects in the vessel. The claimant defended also upon the ground that 
the vessel was not unseaworthy and that she did not sink because of 
unseawortbiness. 

igsjsFor other cases see same topic & KBY-NUMBBR in ail Key-Numbered Digests & Indexes 



72 250 FEDERAL REPORTEH 

In sustaining its charge, the libelant relied upon the presumptîon 
of unseaworthiness and also upon évidence of unseaworthiness. 

The area of this controversy may be narrowed by disposing briefly 
of two of its phases. 

[1] There is no substance in the claimant's defence that the charter 
was a démise, and, therefore, the owner was reheved of the warranty 
of seaworthiness by the rule of caveat emptor. Sanford & Brooks Co. 
V. Columbia Dredging Co. (D. C.) 163 Fed. 362; Id., 177 Fed. 878, 101 
C. C. A. 92. Manifestly, the charter was a démise, foUowing a more 
or less thorough inspection by an agent of the charterer. Scanlan v. 
The Deck Scow Johnson Lighterage Co. Nos. 15 and 24, 248 Fed. 74, 
C. C. A. . But the rule of caveat emptor applies to a char- 
ter of démise (and to the discharge of the owner's implied warranty 
of seaworthiness) only as to defects in the vessel which are patent 
or which are discoverable after inspection or after an opportunity to 
inspect. The defects in this vessel, being in its rudder port sleeve 
and in the timbers concealed by it, as was afterward discovered, were 
hidden and were not discoverable upon the inspection that was made 
or upon such an inspection as reasonably should be made on entering 
into a thirty day charter, and, therefore, the rule of caveat emptor 
can not be invoked to the relief of the owner on his warranty of sea- 
worthiness. 

[2] Nor do we think there is substance in the libelant's claim to 
recovery on the presumption of the vessel's unseaworthiness. Such a 
presumption necessarily arises and alone will sustain recovery in a 
case where a vessel sinks f rom an unknown cause under circumstances 
where she had been subjected to no external péril, and where nothing 
but her unseaworthiness can explain the accident. In other words, the 
presumption of unseaworthiness arises where the only inference in 
the circumstances is that of unseaworthiness. The L,oyal, 204 Fed. 
930, 123 C. C. A. 252; The Willie (D. C.) 134 Fed. 759; Sanbern 
V. Wright & Cobb Tighterage Co. (D. C.) 171 Fed. 449; Id., 179 Fed. 
1021, 102 C. C. A. 666; Oregon Round Lumber Co. v. Portland & 
Asiatic S. S. Co. (D. C.) 162 Fed. 912; Forbes v. Merchants' Exp. & 
Transp. Co. (D. C.) 111 Fed. 796; Id., 120 Fed. 1019, 56 C. C. A. 681. 
As the circumstances attending the sinking of the "Transit" do not ex- 
clude ail inferable causes except that of unseaworthiness, but, on the 
contrary, very plausibly suggest another cause, the presumption does 
not exist. 

[3] The case, therefore, présents the single question: What caused 
the vessel to sink? 

The "Transit" was a steam lighter of about 175 tons burden, built 
and rigged to carry miscellaneous cargo, and was engaged in light- 
erage service in New York Harbor under charter to the libelant. At 
about 5:30 o'clock on the evening of September 11, 1916, the vessel 
docked at Pier 29, North River, bow in, with her starboard side 
against, the pier. She was heavily laden af t, her f reeboard at the stern 
being only twenty to twenty-two inches, while at the bow it was from 
four to five feet. Her lines were such that when so loaded, and when 



THE TRANSIT Ki 

resting on an even keel, her freeboard amidshîps was less than at 
the stern. 

At about 6 o'clock the captain and crew went ashore, leaving the en- 
gineer in charge for the night. 

If there was neghgence in so loading and in so leaving the vessel, it 
was the neglience of the libelant's servants. 

The vessel made water more or less at ail times, taking in more 
when loaded than when light. She carried three siphons and one 
pump, but seldom had occasion to use more than one siphon. During 
the night in question, the engineer pumped her "dry" three times (that 
is, he lowered the water beyond the reach of the siphon), pumping 
about one hour each time and concluded at the hours of 9 P. M., 12 M., 
and 3 :30 A. M. respectively. He was awakened at about 4 :30 A. M. by 
the water rushing into the hold from the starboard coal bunker deck 
opening. Upon going hastily on deck, he found that the vessel had a 
list toward the pier, that her starboard rail was under water, and that 
the water was about a foot deep on the starboard deck amidships. He 
attempted to close the starboard coal bunker hatch into which the wa- 
ter was flowing, but failing, the vessel filled rapidly and sank. 

The vessel was afterward raised, and, upon being put into dry dock, 
was subjected to several surveys. Thèse disclosed a leak in her side 
(which was of no conséquence) and that the lead sleeVe, designed to 
keep water from entering the seams of the rudder port, was badly 
worn, and that the seams in the rudder port were open, permitting wa- 
ter when driven from a hose from within, to flow out in streams of 
varying sizes. Witnesses for the libelant testified, that, under the 
greater pressure upon the vessel when in the water and down at the 
stern, water would flow in in quantities sufficient to sink her, and that, 
in the opinion of some of them, the defective condition of the rudder 
port and its sleeve amounted to unseaworthiness and was the cause of 
the vessel sinking. 

The counter testimony of the claimant tended to prove that the ad- 
mittedly defective condition of the rudder port of the "Transit" was 
not unusual in vessels of her âge and build ; that it did not amount to 
unseaworthiness and did not cause the vessel to sink; but, that she 
sank through a cause that had no relation to the rudder port or to its 
condition. 

U^pon the first point it was testified for the claimant, that water, 
when directed against the rudder port by a hose from within, seeped 
through many places and flowed freely through several places in 
streams varying in size from that of a spike hole to that of a nail 
hole, and that ail the water, if broughttogether, would make a stream 
no greater than from one to one and one-half inches in diameter; 
that gauged by the time actually required to fill the vessel's water tanks 
from a two and one-half inch hose under city pressure, and by the low- 
ering of the vessel an inch or two in the opération, as shown by ex- 
périence, the vessel could not be sunk by the quantity of water that 
would come through the rudder port leaks in one hour, but that it 
would take anywhere from a whole night to several days for enough 
water coming through the leaks to sink her. 



74 250 FEDERAL EEPOETEB 

This testimony, considered with référence to the interest of the wit- 
nesses and the manner in which it was delivered, is, without other con- 
sidérations, persuasive that the vessel did not sink because of the in- 
flow of water through the seams of the rudder port. But there are 
other facts in the case which are not compatible with the libelant's the- 
ory that the vessel sank by filling f rom the rudder port leaks. Thèse 
concern the claimant's theory of the sinking. 

From évidence that was not disputed or else was decidedly prepon- 
derating, the following facts were established: The pier to which the 
"Transit" was moored had a number of fenders arranged along its 
side. Each fender was made up of a cluster of piles, standing out 
from the pier, to which heavy oak planking, vertically arranged, was 
bolted. The planking was sawed oiï about two feet above low water. 

The vessel was docked in the evening on the flood tide, with her 
midship directly opposite a fender-' It was low tide at 2:32 A. M. at 
Governors Island. Slack water lasted but a little while, the tide turn- 
ing to flood at the pier at about 3 A. M. The guard of the vessel amid- 
ships was sufficiently low to move under and be caught by the over- 
hang of the fender at low water. The tide on the turn to flood tended 
to set the vessel against the pier. Within one and one-half hours after 
low water (and within one hour after she had been pumped out), the 
vessel had a list toward the pier as though caught by a fender and 
held there against the rising tide ; the starboard rail, which was twelve 
inches above the deck, was under water; the starboard deck was 
awash; the port rail was high out of water; and water was running 
down the starboard coal bunker hatch in considérable volume and 
with sufficient force to wash the coal out of the bunker. (The coal in 
the port bunker was found undisturbed.) The vessel thus filled and 
sank, but in sinking she moved against the set of the tide and in the 
direction of the list of her hull and finally came to the bottom on an 
even keel six or eight feet away from the pier. 

The claimant maintains that the proper inference from thèse facts 
is that the vessel sank, not by filling from leaks in her rudder port, but 
by being caught and held by a pier fender against the rising tide until 
she listed and filled. On being raised, the vessel showed no marks of 
contact with the fender" bottom. This, however, was spongy or slimy. 

No one knows what caused the vessel to sink, for no one saw the 
cause operating. The cause, therefore, must be inferred from the 
facts. The dominant facts are two: First, that the vessel leaked; 
second, that she listed. The certain inference is that she filled in con- 
séquence of one or the other. Aside from the testimony bearing di- 
rectly on the question of the size and the effect of the leaks, which, as 
we hâve said, inclines against the libelant, the fact of the vessel's list 
is whoUy incompatible with the theory that she filled from leaks. The 
leaks were in the rudder port, through which the water seeped and 
flowed into the biîge. As openings from the hold into the bilge were 
at ail times maintained on each side of the keelson by keeping off eight 
inch planks, water leaking into the bilge would naturally pass through 
the bilge openings and rise gradually in the hold, seeking its own level, 
and would cause the vessel, not to list, but, gradually to sink on an 



FEEBEEICK V. SILVERMAN 75 

even keel without sweeping the coal from the starboard bunker and 
without changing her position with référence to the pier. But the 
fact is, she did not fill gradually from below, but, having listed, she 
filled rapidly from above, and sank six or eight feet away from her 
original position. 

The trial judge found that the vessel sank by reason of a pier fender 
catching the vessel, listing her, and holding her down against a rising 
tide. This conclusion is fairly inferable from the facts. But, what- 
ever may hâve been the cause of the vessel sinking, we are satisfied 
from the évidence that it was not unseaworthiness due to the leaky 
condition of her rudder port. As the libel charges unseaworthiness as 
the cause of the sinking, and as we hâve found that the charge has not 
been sustained by the évidence, we affirm the decree of the trial court 
dismissing the libel. 



FREDERICK v. SILVERMAN. 

(Clrnilt Court of Appeals, Thlrd Circuit. Aprfl 2, 1918.) 

No. 2346. 

1, Bankbuptct <3=ia6(2) — Tuunovek Peoceedinqs — Contempt Proceedings. 

In a turnover proceeding the Issue is whether the bankrupt had prop- 
erty within his possession or control at the date of the bankruptcy, 
whieh he retained and concealed from his trustée ; but in contempt pro- 
ceedings for f allure to comply with an order directing the bankrupt to 
turn over property to the trustée, the only question is whether the 
bankrupt Is personally able to comply with the order prevlously made. 

2. Bankkuptcy <S=>446 — Pétition to Révise. 

Where disputed questions of fact were involved on the turnover pro- 
ceeding, an order modtfying the referee's prder capnot be reviewed on 
pétition for révision in matters of lav?, under Bankruptcy Act July 1, 
1898, c. 541, § 24b, 30 Stat. 553 (Comp. St. 1916, § 9608). 

Pétition for Revision of Proceedings of the District Court of the 
United States for the Western District of Pennsylvania ; W. H. 
Seward Thomson, Judge. 

In the matter of the bankruptcy of Benjamin Silverman. Pétition 
by EUiott Frederick, trustée, to revise orders modifying and reversing 
parts of two orders of the référée directing the bankrupt to turn over 
certain property which he had concealed from his trustée, and finding 
him guilty of contempt for failure to comply. Pétition to revise dis- 
missed. 

Weil & Thorp, of Pittsburgh, Pa. (S. Léo Roslander and George K. 
Warn, both of Pittsburgh, Pa., of counsel), for petitioner. 
Simon Sher, of Pittsburgh, Pa., for respondent. 

Before BUFFINGTON, McPHERSON. and WOOLLEY, Circuit 
Judges. 

WOOLLEY, Circuit Judge. This case when argued presented many 
difficulties, due, we now find, to confusion in the proceedings below 
and to misapprehension of what may be reviewed on pétition to su- 

^;=:9Foi oUier cases see same toplc & KBY-NUMBER in ail Ker-Numbered DlgesU & Indexât 



76 250 FEDERAL EEPOETEE 

perintend and revise. A statement that removes the confusion will dis- 
pose of the case. 

The matter is hère on one pétition to revise two orders of the Dis- 
trict Court affîrming, modifying, and reversing parts of two orders of 
a référée in bankruptcy, by which the référée directed, — firstly, that the 
bankrupt turn over certain property which hç had concealed from his 
tustee; and, secondly, that he be held guilty of contempt for failure 
to comply with the order to turn over. 

On July 18, 1916, Silverman was adjudged a bankrupt. On October 
S, the trustée filed with the référée a pétition charging that the bank- 
rupt had concealed certain of his property and asking for a rule upon 
the bankrupt to show cause why he should not deliver the same to him. 
After extended hearings, the référée, on March 2, 1917, made a report 
in which he found that "the bankrupt should be ordered to deliver to 
the petitioner, the trustée, the diamond stud mentioned in the pétition, 
or its value, $1,000.00, and also to pay [him] the sum of $582.65." 
Exceptions to the report and a pétition for rehearing were filed by 
the bankrupt and a pétition for review was filed by the trustée. 

Having granted a rehearing, the référée, on April 19, filed a second 
report sustaining the first, and, on June 2, he entered an order in ac- 
cordance tiierewith. This is ref erred to generally as "the turnover or- 
der." 

On June 21, the référée certified to the District Court, for its opin- 
ion, the questions he had decided by his turnover order. Two days lat- 
er, that is, on June 23, and before the District Court had had an oppor- 
tunity to hear and décide the questions certified, the trustée filed a péti- 
tion in the District Court, wherein (after reciting the turnover proceed- 
ing before the référée and the resulting order) he charged that the bank- 
rupt had refused and neglected to obey the referee's order, and prayed 
for a rule to show cause why the bankrupt should not be adjudged in 
contempt. The bankrupt made the same answer to' this rule as he had 
made to the rule instituting the turnover proceediag, which was, that 
he had lost the diamond prior to his adjudication, and that, not having 
it, he could not iri the first instaiice conceal it, and he could not in the 
second instance tuto it over. 

The rule and answer in the contempt proceeding were then ref erred 
to the référée. On July 31, the référée made a report on the référence, 
wherein he first adverted to his turnover order of June 2 (which was 
still before the District Court on his certificate), and recommended 
that the order be amended by reducing the sum to be paid from $582.65 
to $182.65, and by ordering the bankrupt to turn over the diamond 
stud, without, in the alternative, allowing him to pay $1,000 as its val- 
ue. Following tWs recommended amendment to hig turnover order, 
which, as we hâve said, had not received the considération or décision 
of the District Court, the référée at the same time and in the same re- 
port recommended that : 

"An order should bè made on the bankrupt to comply with the order of the 
référée dated June 2, 1917 (which in effect was a recommendation that the 
court approve his turnover order), or, in the case of coutiuued disobedlence 
thereto, that he should be pnnished for contempt." 



FREDERICK V. SILVERMAN 77 

On exceptions liberally and promiscuously noted by both the trus- 
tée and bankrupt, thèse two proceedings came before the court for the 
first time. What did the court find in the record? It found, first, a 
turnover order made by the référée, the questions in which had been 
certified to but had not been considered by the court. It found a con- 
tempt proceeding instituted in the court against the bankrupt for f ail- 
ing to comply \vith the referee's undetermined turnover order. It 
found also a referee's report in the contempt proceeding recommending 
the bankrupt's imprisonment for faihire to comply with the turnover 
order, which had not received the approval of the court. It found 
further that the référée had changed and amended his turnover order 
in the very report in which he recommended the bankrupt's imprison- 
ment for failure to comply with the order when amended. 

What was the court asked to do? The bankrupt asked the court to 
find on the facts against the referee's turnover order holding that he 
had retained and concealed property, and against the referee's report 
on the contempt proceeding holding that he was presently able to com- 
ply with the turnover order. The trustée insisted, on the other hand, 
that as the bankrupt had not appealed f rom the referee's order in the 
turnover proceeding, that order was conclu si ve upon the bankrupt, 
and, therefore, he could not be heard to say in the contempt proceeding 
that he did not hâve the property which the référée had found in the 
turnover proceeding that he had ; that the court could not go behind 
the referee's turnover order and retry the issue upon which that order 
was based ; that, therefore, the only matter for the court's considéra- 
tion in the contempt proceeding was the présent ability of the bankrupt 
to comply with the turnover order ; and, finally, that the référée could 
not amend his turnover order by reducing the amount to be paid and 
by taking from the bankrupt the alternative of delivering the stud or 
paying its value in money. 

What did the court do? It proceeded first of ail to dispel the con- 
fusion by estabhshing an orderly record. This the learned trial judge 
did by deliberately separating the turnover proceeding from the con- 
tempt proceeding. He then took up the two proceedings one at a time 
in the order in which they should hâve been brought and decided, and 
he disposed of them one at a time upon the issues raised in them re- 
spectively. 

[1], In doing this the learned trial judge was moved by the practical 
considération of disentangling what appeared to be a hopelessly in- 
volved record, and also for the very proper purpose of hearing and de- 
termining the two proceedings, when separated, according to the rule 
applicable to s«ch cases announced by the District Court of the United 
States for the Eastern District of Pennsylvania and approved by this 
court. In re Epstein (D. C.) 206 Fed. 568 ; Id., 210 Fed. 236, 127 C. 
C. A. 54. In that case the court clearly distinguished between turn- 
over proceedings and proceedings in contempt for violating a turnover 
order, by distinguishing the issues involved in the two proceedings. 
It held, in substance, that in a turnover proceeding the issue is whether 
the bankrupt had property within his possession or control at the date 
of bankruptcy which he had retained and concealed from his trustée. 



78 250 FEDEBAL KBPORTEtt 

Being fundamental, this issue must be raised and decided first. When 
the court bas determined this issue against the bankrupt, and when 
the bankrupt bas failed to comply with the court's order to turn over, 
the next proceeding is one of contempt. In the contempt proceeding, 
the question of the bankrupt's possession and concealment of property 
having previously been determined is not in issue. The only question 
is, whether the bankrupt is presently able to comply with the court's 
order previously made, and, accordingly, whether he is defying its 
order. The différence in the issues of the two proceedings and the 
dependence of the latter upon the former compel their separate con- 
sidération and détermination. This is what the learned trial judge did 
in this case. He first reviewed the referee's turnover order on the is- 
sue of property retained and concealed by reviewing the facts on which 
it was based. He found that the bankrupt did not hâve the diamond 
stud at the date of bankruptcy, and that, in conséquence, he did not 
conceal it f rom his trustée. The judge, thereupon, reversed that part 
of the referee's order directing the bankrupt to turn over the stud 
(which order was before him on the referee's certificate), and aiifirmed 
the part directing payment of a reduced sum of money (considered 
on the trustee's exception of September 6). 

After deciding ail matters arising in the turnover proceeding, the 
trial judge then turned to the contempt proceeding. Having already 
found in the former proceeding that the bankrupt did not hâve and 
therefore did not conceal the diamond stud, he, olE course, had to find 
in the contempt proceeding that the bankrupt was not guilty of con- 
tempt for not turning over what he did not hâve. 

The judge thereupon dismissed the contempt proceeding on payment 
by the bankrupt of the small money balance found due in the first 
phase of thèse double proceedings. 

[2] On pétition to superintend and revise, the trustée now asks this 
court to reverse the action of the trial judge in both proceedings. 
Obviously this court cannot review and revise an approved turnover 
order made in a proceeding, where, as in this one, disputed questions 
of fact were involved. An order so made ca.nnot be reviewed by a 
Circuit Court of Appeals on pétition for revision in matters of law 
under section 24b of the Bankruptcy Act (Comp. St. 1916, § 9608). 
Ross v. Stroh, 165 Fed. 628, 91 C. C. A. 616; EUis v. Krulewitch, 141 
Fed. 954, 73 C. C. A. 270; Moore Dry Goods Co. v. Brooks, 240 
Fed. 943, 153 C. C. A. 629; In re Throckmorton, 149 Fed. 145, 79 C. 
C. A. 15. 

Nor do we find anything to revise in the contempt proceeding. Hav- 
ing approved the réduction of the sum to be turned over (which was 
promptly paid), and having decided that the bankrupt did not hâve 
and therefore did nOt conceal the diamond stud, there was left no or- 
der which the bankrupt could defy. Dismissal of the contempt pro- 
ceeding followed necessarily. 

The trustee's pétition to revise is dismissed. 



UNIÏLD STATES V. EEPUBLIC BAG & PAPER CO. 79 

TJKITED STATES v. REPUBLIO BAG & PAPER CO. 

(Circuit Court of Appeals, Second Circuit. Marcli 14, 1918.) 

No. 170. 

1, United States <g=>70(l) — Contracts — Construction — Provisions Respect- 

ING QuANTITY. 

l'roposals by the Public Printer for the purcliase of prlnt paper also 
contaiufid the advertisements inviting bids wliicli set forth in a scliedule 
the estimated quantity of each kind of paper required. Botli advertise- 
ment and proposai provided tliat the successful bidder would be required 
to enter into a contract to furnish the quantity required, "whether 
more or less than the estimâtes." Defendant's bid was accepted, and 
it entered into a contract, prepared by the government, requiring it for the 
term of six montlis to "furnish * * * so much of the estimated 
quantity as may be ordered by the party of the second part." Held, that 
l)y the terms of the contract the quantity défendant was required to 
furnish was limited by the estimate as a maximum, and that, whatever 
the reason for the varlance between the contract and proposai, the con- 
tract must govern as determinlng the obligation of défendant. 

2. Sales <S=71(3) — Contracts — Construction — "More or Less." 

The words "more or Icss," used in a contract of sale in connection with 
an estimated quantity, when the only measure Is the estimate Itself, allow 
only a small latitude of variation. 

[Ed. Note. — For other définitions, see Words and Phrases, First and 
Second Séries, More or Less.] 

Ward, Circuit Judge, dissenting. 

In Error to the District Court of the United States for the South- 
ern District of New York. 

Action by the United States against the RepubHc Bag & Paper Com- 
pany. Judgment for défendant, and plaintiiï brings error. Affirmed. 

Wrlt of error to a judgment dismissing a complaint at law upon demurrer. 

The complaint alleged that the plaintifC, through the Public Printer, on 
March 1, 1916, entered into a contract with the défendant for supplying it 
with a ceitain part of the paper for public printing and binding; that before 
May 10, 1916, the défendant had delivered to the Public Printer 270,000 
pounds of paper, and had accepted orders for 80,000 pounds more ; and that 
it flnally delivered .338,716 piunds ail told. It further alleged that the 
needs of the plaintift' for printing and binding work for six months from 
March 1, 1916 (the term of the contract), were over 965,500 pounds ; that the 
défendant refused to deliver more than 338,716 pounds ; and that the plain- 
tifï was obliged to go into the market and buy at a higher price, to the damage 
of the plaintift in the sum of over ipil,0OO. 

The contract provided that the défendant should furnish "so much of the 
estimated quantity [of paper] as may be ordered by the party of the second 
part, whether more or less than the estimate stated in the proposai, of the 
kind and quality of paper called for and described under the standard sam- 
ple spécifications for lot 1." 

Attaclied to the contract were the proposais upon which bids had been 
talcen, and attached to this proposai were the varions schedules describing 
the paper to be furnished. Lot No. 1 read as follows: "300,000 pounds white 
news prlnt paper 25x36", 36-pound basis," etc. The contract ran for a period 
of six months from March 1, 1916. 

The proposais on which the bid was made contalned also the advertisement 
upon which bids liad been invited. This advertisement contalned, among 
other things, the following: "Contracts will be entered into for supplying the 

<Ê=»For other cases see Bame topio & KBY-NUMBER in ail Key-Numbered Disesta & Indexea 



80 250 FEDERAI, BEPORTEB 

auantltics reqnlred, whether more or less than the estimâtes, for a period ot 
six months or one year commenclng March 1, 1916." The estimated quanti- 
ties were then set forth below. The proposais also contained some 49 In- 
structions to the bidders describlng the conditions under which the bidders 
might bld and the spécifications of the terms used in the schedules describlng 
the quality and quantity. Thèse were dlvlded into four main divisions, the 
flrst 12 instructions under the head of "Proposais," the next 14 under the 
head of "Quantity and Quality," the next 8 under the head of "Packlng," 
the next 4 under that of "Dellvery," and the remalnder under the headlng 
"Contract" The first instruction under the head of "Quantity and Quality" 
read as follows: "No. 13. The subjolned schedule spécifies the quantity as 
nearly as may be estimated and the quality of each klnd of paper required, 
but the contractor must furnish the quantity which may be needed, whether 
more or less than the estlmate." The first provision under the subhead "Con- 
tract" read: "No. .39. The successful bidders will be required to enter into 
a contract to furnish the quantity required, whether more or less than the 
estimâtes, and to conform in every particular to the instructions, schedule, 
spécifications, and standard samples as flxed upon by the joint committee of 
printing' fumished by the Public Printer." 

Francis G. Caffey, U. S- Atty., of New York City (Julian Hartridge, 
of New York City, of counsel), for the United States. 

Joseph G. Cohen, of New York City (Walter C. Noyés, of New 
York City, of counsel), for défendant in error. 

Before WARD, Circuit Judge, and LEARNED HAND and MAY- 
ER, District Judges 

LEARNED HAND, District Judge (after stating the facts as above). 
[ 1 ] The first question is what the literal meaning of the words is. The 
express undertaking of the défendant is that it shall "furnish * * * 
so much of the estimated quantity as may be ordered by the party of the 
second part [the Public Printer], whether more or less than the esti- 
mâtes stated in the proposai." This is the only language in the contract 
touching quantity at ail. If the phrase had been omitted "whether more 
or less than the estimâtes stated in the proposais," we take it that there 
could hâve been no question that the undertaking would hâve been lim- 
ited by the estimate as a maximum. 

[2] The plaintifï urges that words like "more or less," when used 
of an amount otherwise ascertainable than by the estimated quantity, 
do no more thaA indicate what the parties at the time honestly suppose 
the quantity will be, and this is quite true. Such words do not them- 
selves constitute any measure of quantity, since by hypothesis that is 
defined by other terms. Brawley v. United States, 96 U. S. 168, 24 L. 
Ed. 622 ; Marx v. American Malting Co., 169 Fed. 582, 95 C. C. A. 
80 (semble); Grant v. United States, 7 Wall. 331, 19 L. Ed. 194. Yet, 
when the only measure is the estimate itself, they allow only a small 
latitude of variation, much within that hère asserted. Norrington v. 
Wright, 115 U. S. 188, 6 Sup. Ct. 12, 29 L. Ed. 366; Fine River Log- 
ging Co. v. United States, 186 U. S. 279, 22 Sup. Ct. 920, 46 L. Ed. 
1164; Hadley Dean Plate Glass Co. v. Highland Glass Co., 143 Fed. 
242, 74 C. C. A. 462. In the contract proper there was no outside 
measure but the estimated quantity. There might hâve been, it is 
true, if the language had been "ail paper required by the party of the 
second part, whether more or less than the estimâtes stated in the pro- 



UNITED STATES V. REPUBLIC BAG & PAPER CO. 81 

posai," but it was not that. On the contrary, it was "so mucli of the 
estimated quantity," thus making the outside measure the estimated 
quantity, and not the requirements of the Pubhc Printer. Therefore, 
taken by itself, the contract seenis to us to support the defendant's 
contention. 

The plaintiff, however, very properly argues that the contract is not 
to be taken by itself, but in conjunction wlth the Pubhc Printer's pro- 
posai. In this proposai appear not only an advertisement, but certain 
définitions of the quantity to be delivered. The advertisement reads : 

"Coiitracts will be entered into for supDlying the quantities required, 
whether more or less than tlie estimâtes." 

No. 13 of the "Instructions" provides: 

"The subjoined schedule spécifies the quantity as nearly as ean be estimated, 
* * * but the eontractor must fiirnlsh tlie quantity whleli may be ueeded, 
whether more or less than the estimate." 

No. 39 provides : 

"The successful bldders wlll be requlred to enter Into a contract to furnlsh 
the quantifies reqnired, whether more or less than the estimâtes." 

If thèse stood alone, we should be disposed to say that the measure 
adopted was the quantity "required" or "needed," and to hold that 
Brawley v. United States, supra, applied. That would invite the other 
questions raised, afifecting the validity and mutuahty of the contract. 
Since, however, we hâve two conflicting clauses to construe, it seems 
to us we must adopt that which occurs in the actual undertaking of 
the parties, rather than in their preliminary negotiations. Therefore 
we conclude that the contract proper should prevail. 

Just why the contract varied from the proposais we cannot, of 
course, surmise, but we cannot with justice disregard the fact that it 
did vary, and that the variation was big with conséquences which, had 
the défendant been faced with them, we should not assume it would 
hâve accepted. If an ambiguity bas resulted, we may fairly apply the 
canon contra proferentem, and throw the burden of interprétation 
upon him who by the variation put the matter in doubt. 

Judgment affirmed. 

WARD, Circuit Judge (dissenting). The court construes the con- 
tract as one for the estimated quantity of paper as a maximum, whereas 
it seems to me to be one for the government's actual requirements. 
The différence is one of construction of writings. 

Section 3 of Act Jan. 12, 1895, c. 23, 28 Stat, at L,. 601 (Comp. St. 
1916, § 6957), requires the Public Printer to advertise — 

"for sealed proposais to furnlsh the government wlth paper, as specified in the 
sehedule to be funilshed to ai)pllcants by the l'uhllc Printer, settlng forth in 
détail the quallty and quantltles required for the Public Printer." 

The advertisement of the Public Printer stated : 

"Contracts will be entered into for supplying the quantltles required 
whether more or less than the estimâtes for a perlod of six months or one 
year commenclng March 1, lOlG. 
250 F.— 6 



"82 250 FEDERAL REPORTER 

"The approxlmate estimated quantitles for one year get forth In détail 
In the schedule comprise 305,000 pounds news prlnt paper." 

The Republic Company's proposai was — 

"to supply the Government of the United States with so much of the paper 
more or less embraced in tlie following schedule as may be recfuired for the 
public prlnting and binding from March 1, 1016, to February 28, 1017, or for 
a period of six months from March 1, 1916." 

The f orm of proposais was accompanied by instructions as follows : 

"No. 13. The subjolned schedule speeifles the quantity as nearly as can 
be estimated and the quality of each kind of paper requlred, but the con- 
tractor must furnish the quantity which may be needed, whether more or 
less than the estimate." 

"No. 39. The successful bidders wlU be required to enter into a contract 
to furnish the quantlties required whether more or less than the estimâtes." 

Ail thèse papers were a part of the contract in which the Republic 
Company, as party of the first part, covenants to furnish the Public 
Printer, as party of the second part, "so much of the estimated quan- 
tity as may be ordered by the party of the second part, whether more 
or less than the estimate stated in the proposai," and the Public Printer 
■covenants to pay the sum of three cents per pound for the same. 

The schedule certainly does "set forth in détail" the "quantity re- 
quired," as provided by the act. But it is said that the provision of 
the proposai that more or less may be required is not detailed. If that 
is so, it does not relieve the contractor of the obligation. Only the 
government can complain that its agents hâve not conformed to the 
statute, whereas it is asking to enforce the contract as made. 

The covenant of the Republic Company is in the printed form of con- 
tract, and it is difficult to believe that the government intended by the 
language used to départ from the carefuUy reiterated provisions pre- 
ceding it that the estimate was an estimate only, and that the contract 
must be for the government's requirements during the period it covered 
■or that the Republic Company so understood it. Such a construction 
does violence to what is obviously the main purpose of the statute and 
of the contract, namely, that the government shall provide for its 
needs during fixed periods of time, and not be at the risk of the mar- 
ket for its needs as they arise from day to day. If the contract had 
stopped with the words "so much of the estimated quantity as may be 
ordered," there would be more force in the contention that the estimate 
was a limitation, but effect must be given to the words immediately 
following, "whether the same be more or less than the estimate stated 
in the proposai," and they seem to me to completely exclude the con- 
struction that the estimate is a limitation. 

If the contract is one for the government's requirements, then the 
fact that its requirements may vary largely does not make its contracts 
to differ in principle from those of a manufacturer, a hôtel keeper, a 
railroad, or a steamship company. Both parties are bound; each tak- 
ing the risk of the extent of the requirements and the risk of the mar- 
ket. Clearly, if the market price for paper had fallen, the government 
could not hâve supplied its requirements by purchasing from other 



HAERELL V. ATLAS PORTLAND CEMENT CO. 83, 

parties. Mr. Justice Davis said, in Grant v. United States, 7 Wall. 
331, at page 338, 19 L. Ed. 194: 

"The only remaining point In the case relates to thé rescission by Secretary 
Cameron of the order of the 9th of March. This proceeding was undouhtedly 
taken because the supplies needed in Arizona could be elther purehased there 
at cheaper rates, or forwarded more securely from St. Liouis. Whether the 
conduct of the Secretary of War was or was not justifiable is net a question 
to be eonsldered in deciding this suit; for the clalmant has not shown a. 
State of case on which he could reeover if the reselndlng order had never 
been made. The conlract entltled hlm to furnlsh, at certain priées, ail the- 
supplies that might be needed in Arizona untll the 20th of March, 1862. To 
enable hlm to reeover for a breach of this contract, he should hâve proved 
that supplies were needed at the posts in Arizona after the reselndlng order 
was made, and the pccunlary loss he sustained in not beiug allowed to furnish, 
them. This he has wholly failed to do." 

I think the judgment should be reversed. 



HAKRELIi V. ATL.4.S PORTIAND CEMENT CO. * 

(Circuit Court of Appeals, Elghth Circuit. March 26, 1918.) 

No. 4994. 

Masteb anu Servant <S=]93(3) — Injuries to Servant — Feixow Servants. 
Where a rallroad company t^ansported rock from a cément eompany's 
quarry to its plant, and employés of the railroad company who took 
loaded cars from and empty cars into the quarry plt over the tracks ot 
the cernent company worked In conjunction with that eompany's serv- 
ants In loading and reuiovlng the cars, and ail were under the direction 
of the cernent company, such employés, though hlred and paid by the- 
railroad company, were sen-ants of the cernent company and fellow 
servants of the employés of that company, for one who has the rlght to. 
control the dolng of the work is the "master." 

[Ed. Note. — For othtr définitions, gee Words and Phrases, First and 
Second Séries, Master.] 

In Error to the District Court of the United States for the East- 
em District of Missouri ; David P. Dyer, Judge. 

Action by George Edward Harrell against the Atlas Portland Cément 
Company. Judgment for défendant, and plaintifï brings error. Af- 
firmed. 

John G. Parkinson, of St. Joseph, Mo. (James W. Mytton, Alletv 
May, and Richard M. Duncan, ail of St. Joseph, Mo., on the brief), for 
plaintiff in error. 

George A. Mahan, of Hannibal, Mo. (A. R. Smith and Dulany Ma- 
han, both of Hannibal, Mo., on the brief), for défendant in error. 

Before SANBORN and CARLAND, Circuit Judges. 

SANBORN, Circuit Judge. Mr. Harrell sued the Atlas Portland 
Cément Company for damages that resulted, as he averred, from a 
Personal injury inflicted upon him, as he alleged, by the négligence of 
its servants, and especially of its engineer, who was operating its steam 

®=»Fot otber eues Bee eame toplc & KEY-NUMBER in ail Key-Numbered Disests & Indexe». 
•Rehearing denled September 2, 1918. 



8d 250 FEDERAL REPORTER 

shovel. The company answered that, i£ the plaintiiï suffered any 
injury on account o£ the negUgence of any of its servants, they were 
his fellow servants and the company was net liable therefor. At the 
close of the évidence for the plaintiff, the court directed the jury to 
return a verdict for the défendant on the ground that the plaintiff's 
injury appeared to hâve been caused by the négligence of his fellow 
servants. This is the ruling of which the plaintiff complains, and it 
was founded upon thèse facts : The cément company was, and for more 
than six years had been, a corporation engaged in the manufacture and 
sale of cément at Ilasco, Mo. It had a large manufacturing plant 
there where it crushed rock, burned it, and made it into cément. About 
a mile from its manufacturing plant it had quarries from which it 
took the rock and transported it on cars over railroad tracks to its 
plant. It had the Hannibal Connecting Railway Company do ail its 
railway work, such as loading the rock onto cars, pulling them away 
from the steam shovel, and turning the cars over to other men who 
took them over the railway tracks to the crusher and the mill. The 
quarry in which the plaintiff was injured contained a solid body of 
rock about 30 feet in height, and the rock used was separated from 
this solid body by dynamite and was then loaded into the cars by 
means of a steamshovel and crâne operated by an engineer and men 
who were employed and paid by the cément company. The plaintiff 
was employed and paid by the Hannibal Connecting Railway Com- 
pany. The solid rock or cliff of the quarry faced north. Two par- 
allel railway tracks, near enough to each other to permit the shovel 
and crâne to stand on a car upon one of them and load rock onto a 
car on another, extended north from the face of the cliff in the quar- 
ry. Thèse tracks were moved by the cément company from time to 
time as the rock was removed, and there were other tracks in the 
quarry which were likewise used and moved when the work re- 
quired. The plaintiff was the switchman of the crew consisting of an 
engineer, fireman, and this switchman, which was moving the empty 
cars in from the entrance to the quarry to the face of the cliff, taking 
the cars away when loaded, and turning them over to another crew 
which took them from the quarry to the plant. The cars were handled 
in this way. The shovel and crâne were placed upon one of the two 
tracks so that the shovel would reach the rock which had been separated 
or loosened by the dynamite and was lying against the face of the cliff. 
Several empty cars in a train were backed in onto the track by the side 
of the shovel, and the rear car was placed where it could be loaded by 
the use of the shovel and crâne. When that car was loaded, the carS 
were pulled out, the loaded car was set on the track back of the shovel, 
or elsewhere upon an empty track in the quarry, and the other cars 
were backed in, one of them was loaded, the cars were pulled out, and 
so on until four or five cars were loaded, when the crew put them into a 
train and pulled them out of the quarry and turned them over to the 
crew which took them to the plant. 

The engineer of the steam shovel directed the plaintiff when and 
where the cars to be loaded should be placed, when a loaded car 
should be taken out, and when the cars, although not loaded, should 



HARRELL V. ATLAS PORTLAND CEMENT CO. 85 

be removed, and he also directed the opération of the steam sho^■eI. 
The plaintiff controlled the movement of his crew and caused it to piace 
each car to be loaded when and where the engineer directed him to 
place it and caused his crew to remove it when the engineer notified hira 
it was loaded and whenever the engineer directed him to remove it. 
The plaintiff had been engaged in this same work for more than four 
years. Ordinarily when a car was to be loaded the engineer would 
direct the plaintiff where to place the car. He would place it. The 
engineer by the use of the shovel or dipper would seize a portion of the 
rock which had been loosened by the dynamite, swing the dipper over 
the car, and drop its contents into it. When the car was loaded, he 
would notify the plaintiff that it was ready for removal, and the plain- 
tiff would cause his crew to pull it out. Sometimes the dipper would 
be used to rake or pull down large quantities of rock which rolled out 
to some distance from the face of the cliff. When the engineer was 
about to use the shovel for this purpose, if the cars were in near the 
cliff, it was his custom to direct the plaintiff to take them out of the 
way ; if there was nothing in there but the men, he would tell the men 
to look out. If the plaintiff' was near handling his crew or cars, he 
or one of his crew would notify him. At the time of the injury to 
the plaintiff, he had been notified that a car had been loaded, had 
caused his crew to attach their engine and empty cars to the loaded 
car to pull it away from the cliff, had signaled the engineer of his 
crew to pull the car out, had placed himself on the step of the car, and 
had seized the grab iron on the corner of the car to enable him to ride 
on it, and the car had started, when, without any notice to him, the 
engineer of the steam shovel caused it to pull down a large quantity of 
loose rocks which struck and seriously injured him. 

The facts of this case which bave now been recited leave no doub+ 
that the plaintiff and the members of his crew, who were employed 
and paid by the Hannibal Connecting Railway Company, and the en- 
gineer and his crew who were operating the steam shovel and who 
were employed and paid by the cernent company, were fellow serv- 
ants, unless, at the time of the injury and in the doing of the acts they 
were respectively performing, the plaintiff and his crew were acting 
under the direction and control of the railway company while the 
engineer and his crew were acting under the direction and control of 
■>the cément company. For they were ail engaged in the common em- 
ployment of quarrying for the cément company and removing rock 
from its quarry near Ilasco to its plant. That the engineer and his 
crew were acting under the direction and control of the cernent com- 
pany and were its servants is conceded. But it is contended that the 
plaintiff was directed and controlled in his acts by the railway com- 
pany and was its servant. Whether he was the servant of the cément 
company or of the railway company is not determined by the fact that 
he was employed and paid and might be discharged by the railway com- 
pany, but by the answer which the facts give to the question : Did the 
railway company or the cément company hâve the exclusive power to 
direct and control his action in doing the work he was performing at 
the time of his injury? Standard Oil Co. v. Anderson, 212 U. S. 215, 



86 250 PBDBEAL EEPORTEB 

220, 221, 29 Sup. Ct. 252, 53 L. Ëd. 480; Brady v. Chicago & G. W.. 
Ry. Co., 114 Fed. 100, 107, 52 C. C. A. 4S, 55, 57 L. R. A. 712; Stand- 
ard Oil Co. V. Parkinson, 152 Fed. 681, 82 C. C. A. 29; Murray v. 
Dwight, 161 N. Y. 301, 314, 55 N. E. 901, 48 L. R. A. 673; Jones v. 
ScuUard, L. R. (2 Q. B. Div. 1898) 565 ; Donovan v. Construction Syn- 
dicate, X,. R. (1 Q. B. Div. 1893) 629. In the last case Lord Bowen 
said : 

"We hâve only to consider In whose employaient the man was at tne tlme- 
when the acts complained of were done, In thls sensé, that by the employer ia- 
meant the person wlio bas a right at the moment to control the doing of the 
act" 

In the first case cited (212 U. S. 220, 221, 29 Sup. Ct. 254 [53 L. Ed. 
480]) the Suprême Court said: 

"It sometlmes happens that one wlshes a certain work to be done for his- 
beneflt and neither has persons In his employ who can do It nor is wllllng 
to take such persons Into his gênerai service. He may then enter into an 
agreement with another. If that other fumishes him with men to do the work 
and places them under his exclusive control in the performance of It, thosc 
men become pro hac vice the servants of hlm to whom they are fumished. 
But, on the other hand, one may prefer to enter into an agreement with an- 
other that that other, for a considération, shall blmself perform the work 
through servants of his own sélection, retalnlng the direction and control 
o£ them. In the first case, he to whom the worlynen are furnished Is re- 
sponsible for thelr négligence in the conduct of the work, because the work 
is bis work and they are for the tlme his workmen. In the second case, he who- 
agrées to fumish the completed work through servants over whom he retains 
control is responsible for thelr négligence in the conduct of It, because, 
though it is done for the ultlmate beneflt of the other, it is still in its doIng 
his own work. To détermine whether a glven case falls wlthin the one class 
or the other we must Inqulre whose is the work being performed, a question 
which is usually answered by ascertaining who has the power to control and 
direct the servants In the performance of thelr work." 

The court below was of the opinion that the facts of this case placed! 
it with the first case stated in the foregoing quotation, and a deliberate 
considération of the évidence has failed to convince that it was in er- 
ror. The entire work and undertaking was that of the cément com- 
pany. The only évidence of its relation to the railway company was 
that it had the railway company do ail the railway work such as load- 
ing the rock, pulling it f rom the steam shovel, and turning the cars over 
to other men to t^e up to the crusher and the mill. When we come 
to the work which the plaintiff was doing when he was injured, the 
évidence is that for more than four years he was doing this work of 
placing empty cars when and where the engineer of the cernent com- 
pany directed him to place them, removing them and turning them over 
to the transporting crew when the engineer told him, that he respec- 
tively placed and removed them at other times when the enginer di- 
rected him to do so, such as when there was danger of injury to the 
crews or those near them by raking down the rock, while there is no 
évidence that the railway company ever controlled or directed him in 
the matter of how or when he should do his work of placing, handling, 
and removing the cars during the four years of his service. And the 
conclusion its that in the conduct of the work the plaintiflf was per- 
forming, at the time of his injury, the cément company had and was. 



DE MOS8 V. UNITED STATES 87 

-exercising the exclusive power to control and direct how, when, and 
where he should do his work, that he was its servant and a fellow 
servant of the engineer and the members of the latter's crew. Otis 
Elevator Co. v. Cliff, 200 Fed. 922, 119 C. C. A. 218; Chicago, B. & 
Q. R. Co. V. Richardson, 202 Fed. 836, 844, 121 C. C. A. 144, 152; 
Philadelphia & Reading Coal Co. v. Barrie, 179 Fed. 50, 54, 102 C. C. 
A. 618, 622 ; Geo. A. Fuller Co. v. McCloskey, 228 U. S. 194, 202, 33 
Sup. Ct. 471, 57 L. Ed. 795 ; Fisher v. Cleveland, C, C. & St. L. Ry. 
Co. (C. C.) 169 Fed. 956, 959; Coughlan v. Cambridge, 166 Mass. 268, 
44 N. E. 218; Higgins v. Western Union Telegraph Co., 156 N. Y. 
75, 77, 79, 50 N. E. 500, 66 Am. St. Rep. 537 ; Wyllie v. Palmer, 137 
N. Y. 248, 257, 33 N. E. 381, 19 E. R. A. 285. 
Let the judgment below be affirmed. 



DE MOSS et al. v. UNITED STATES. 

(Circuit Court oi! Appeals, Eiglith Circuit. Febi-uary 28, 1918.) 

No. 5011. 

1. States cS=55 — Discrimination Between States — Introduction of Liquor 

iNTo Indian Tebritory — Statutes. 

Act March 1, 1895, c. 145, 28 Stat. 693, forbiddlng the Introduction of 
intoxlcating liquor Into Indian Territory, as limited to Interstate com- 
merce by the Oklahoma Enabllng Act, is not unconstitutional, as discrimi- 
natlng between the states in respect of trade and commerce in intoxlcat- 
ing liquors. 

2. Cbiminax, Law <g=>llC9(10) — Appeal — Harmless Erbor. 

In a prosecution for introducing intoxlcating liquor into that part of 
Oklahoma whlch was formerly Indian Territory, in violation of Act March 
1, 1895, c. 145, where the connection of défendants with the purchase and 
shipment of the liquor was clearly and indlsputably shown, and it was 
proven without contradiction that one of the défendants gave his check on 
an Oklahoma bank in payment for the liquor, the admission of oral tes- 
timony as to the amount of the check. and the bank on whlch it was 
drawn was harmless. 

3. Cbiminal Law <@=»560 — Evidence — Sufficienct. 

Proof of a fact, even in a crlminal case, need not be made beyond every 
possibllity of mistake, and évidence is to be taken in a practlcal, reason- 
able way, and regard givea to well-known, settled methods of business. 

4. Ceiminal Law ®=309 — Prestjmptions — Good Chabacteb. 

In a crimlnal prosecution, there is no presumptlon of good character of 
the accused. 

In Error to the District Court of the United States for the Eastern 
District of Oklahoma ; Ralph E. Campbell, Judge. 

Edgar M. De Moss and another were convicted of introducing in- 
toxicating liquor from outside the state of Oklahoma into that part 
of the state vvhich was formerly Indian Territory, in violation of Act 
March 1, 1895, c. 145, and they bring error. Affirmed. 

Frank Lee, of Muskogee, Okl. (J. C. Denton, of Muskogee, 0kl., 
• on the brief), for plaintiffs in error. 

Paul Pinson, Sp. Asst. U. S. Atty., of Muskogee, Okl. (W. P. Mc- 

<S=jFor other cases see same toplc & KEY-NUMBER in ail Key-Numbered Digests & Indexes 



88 250 FEDERAL REPORTER 

Ginnis, U. S. Atty., of Muskogee, Okl., on the brief), for the United 
States. 

Before HOOK, CARLAND, and STONE, Circuit Judges. 

HOOK, Circuit Judge. De Moss and Moore complain of a convic- 
tion and sentences for introducing intoxicating liquor from outside 
the State of Okiahonia into that part o£ the state which was formerly 
Indian Territory, in violation of the Act of March 1, 1895, 28 Stat. 693. 
A large amount of whisky was purchased of a dealer in Kansas City, 
Mo., put in empty lime barrels, and shipped by railroad to Tulsa, Okl., 
where it was seized by public officers. 

[1] It is urged that the act of 1895, as limited to Interstate com- 
merce by the Oklahoma Enabling Act, is unconstitutional, because it 
discriminâtes between the states in respect of trade and commerce in 
intoxicating liquors. A like contention was made in Creekmore v. 
United States, 150 C. C. A. 497, 237 Fed. 743, 755, L. R. A. 1917C, 845. 
It is answered in Toplin Mercantile Co. v. United States, 236 U. S. 531, 
542, 35 Sup. Ct. 291, 59 L. Ed. 705. 

[2] Complaint is also made of the admission of oral testimony as to 
the amount of a check given by De Moss in payment for the liquor and 
the name of the bank on which it was drawn, the check not being pro- 
duced or its absence adequately excused. The connection of both De 
Moss and. Moore with the purchase and shipment of the liquor was 
otherwise shown so clearly and indisputably that the testimony in ques- 
tion, even if incompétent, could hâve caused no préjudice. It was 
proved without contradiction that De Moss gave his check for the 
liquor bought at Kansas City, that when it reached the bank at Tulsa 
it was not paid at once for lack of funds, that Moore arranged with 
the bank to hold it until a deposit was made to cover it, and that it was 
finally paid and charged to the account of De Moss, The précise 
amount of the check was not important, though even that was shown 
by other testimony without objection or contradiction. 

[3] It is also claimed that the identity of the liquor bought and put 
in a car at Kansas City with the liquor seized at Tulsa was not proved. 
We think it was, though the government was much hampered in trac- 
ing the car by objections which we do not regard as sound. Proof of 
a fact, even in a criminal case, need not be made beyond every possi- 
bility of mistake. Evidence is to be taken in a practical, reasonable 
way, and regard given to well-known, settled methods of business, 

[4] The trial court refused to instruct the jury that the accused 
were presumed to be persons of good character and that the presump- 
tion should be considered in determining their guilt or innocence. 
There was no évidence upon the subject. We hâve held several times 
that in a trial for crime there is no presumption of good character of 
the accused. Chambliss v. United States, 132 C. C. A. 112, 218 Fed. 
154; Price v. United States. 132 C. C. A. 1, 218 Fed. 149, L. R, A. 
1915D, 1070; Gréer v. United States, 153 C. C. A. 246, 240 Fed. 320. 
The last case went to the Suprême Court by certiorari and was recently 
affirmed. Gréer v. United States, 245 U. S. 559, 38 Sup. Ct. 209, 62 
L. Ed. (January 28, 1918). 



WARKEN V. UNITED STATES 89 

The complaints of the refusai to give an instruction asked on the 
necessity of corroboration of the testimony of an accompUce and of the 
charge that was given on that subject are too clearly without founda- 
tion to merit discussion. 

The sentences are affirmed. 



WARREN V. TJNITKD STATES. 
(Circuit Court of Appeals, Eiglith Circuit. Ain-il 3, 1018.) 

No. 4878. 

1. Indiaks <®=335 — Introduction into Indian Territory — Statutes. 

Act Maroli 1, ISOÔ, c. 145, 28 Stat. 693, forblddins.': the introduction of 
intoxiciitiiiî? liquor into the Indian Territory, as limited to interstate com- 
merce l)y tiie Oklahoiua Enabling Act, is not uncoustltutional, as discrimi- 
nating between the states in respect of trade and commerce in intoxicating 
liquors. 

2. Criminal Law <@=5603(2) — Coktisuance — Denial. 

Tlie denial of the motion for continuance in thls case signed only by 
counsel and not stating facts under oath, was proper. 

3. Criminal Law <gc»1151 — Appeal — Continuance — Discrétion. 

A motion for a continuance on the ground of the absence of witnesses 
and counsel is addressed to tlie Sound discrétion of the trial court, and its 
ruling is not subject to review, unless there was an abuse of discrétion. 

4. Criminal Law <S=>595(8) — Continuance — Denial. 

Ordinarily évidence as to the character of the accused is not deemed 
of such materiality tliat the refusai of a continuance for the purpose of 
procuring testimony of such character will constitute error. 

5. Criminal Law <S=ï593, 59€i(1) — Continuance — Denial — Abuse of Discee- 

tion. 

Where défendant had the services of able counsel throughout the trial, 
and was able to produce a nuniber of character witnesses, the denial of a 
continuance, requested on the ground of the absence of other character 
witnesses and additlonal counsel, canuot l>e deemed an abuse of the 
court's discrétion. 

6. CRuaNAL Law <S=3730(2) — Trial — Improper Remarks of Counsel. 

Where the court, when its attention was called to improper remarks of 
the prosecuting attorney in his opening address, fully stated to the jury 
that they could only consider the évidence admitted, and not statements of 
counsel, the remaries must be deemed to hâve been elïectively withdrawn, 
though the jury were not spocitically directed to disregard them. 

7. Criminal Law iS=3820(18) — Instructions — Refcsal of Requests. 

Where the court charged that the fact accused bore a good réputation 
as a law-abiding citizen was not a complète défense, but that such a répu- 
tation should be considered by the jury, together with ail the other évidence 
in the case, and if, on a considération of ail the évidence, character évi- 
dence included, there should be a reasonable doubt as to défendants guilt, 
he should be acquitted, the refusai of a requested instruction that évi- 
dence of an established réputation for good character, if relevant to the 
Issue, may alone create a reasonable doubt, was not error, being cov- 
ered by the charge given, which presented the law as favorably as de- 
fendant was entitled to hâve it presented. 

In Error to the District Court of the United States for the Eastern 
District of Oklahoma ; Ralph E. Campbell, Judge. 

^stFot other cases see same topic & KBY-NUMBBR ia aU Key-Numbered Digests & Indexes 



90 250 FEDERAL EEPOBTBa 

Robert K. Warren was convicted of introducing intoxicating liquor 
from outside of the state of Oklahoma into that part of the state which 
was formerly Indian Territory, in violation of Act Mardi 1, 1895, and 
he brings error. Affirmed. 

Frank Lee, of Muskogee, Okl. (James C. Denton, of Muskogee, Okl., 
on the brief), for plaintiff in error. 

Paul Pinson, Sp. Asst. U. S. Atty., of Muskogee, Okl. (W. P. Mc- 
Ginnis, U. S. Atty., and Alvin F. Molony, Sp. Asst. U. S. Atty., both 
of Muskogee, Okl., on the brief), for the United States. 

Before HOOK, CARI.AND, and STONE, Circuit Judges. 

CARIvAND, Circuit Judge. [1] Plaintifï in error, hereafter called 
défendant, complains of a conviction and sentence for introducing in- 
toxicating liquor from outside the state of Oklahoma into that part of 
the state which was formerly the Indian Territory (28 Stat. 693). It 
is urged that the statute under which the défendant was convicted, as 
limited to Interstate commerce by the Oklahoma Enabling Act, is un- 
constitutional, because it discriminâtes between the states in respect 
of trade and commerce in intoxicating liquors. This contention was 
made in Joplin Mercantile Co. v. United States, 236 U. S. 531-542, 
35 Sup. Ct. 291, 59 L,. Ed. 705, Creekmore y. United States, 237 Fed. 
743, 150 C. C. A. 497, I.. R. A. 1917C, 845, and De Moss and Moore 
V. United States, 250 Fed. 87, but was not sustained. 

[2-5] It is next urged that the court erred in overruling defend- 
ant's motions for a continuance, made November 9, and November 15, 
1916. On November 9th défendant was arraigned, pleaded not guilty, 
and filed a motion for a continuance, which stated certain facts not 
under oath and was signed only by counsel. There was no error in 
overruling this motion. On November 15, 1916, the défendant, who 
was jointly indicted with one Bomford, made a second motion for a 
continuance, and in support thereof stated under oath certain facts, 
which so far as are material were as follows : 

That the défendant resided at Hugo, Choctaw county, Okl., 250 miles 
from Chickasha, where the indictment was pending for trial, and where 
the motion for a continuance was made. That défendant was indicted 
October 7, 1916, at the term of court held at Ardmore, Okl. That 
since the indictment was returned he had been continuously engaged 
in a campaign for élection as state représentative to the Législature of 
Oklahoma, and also in the business and trial of criminal causes in the 
district court of Choctaw county, Okl, in his officiai capacity as coun- 
ty attomey of said county. That said campaign closed Tuesday, No- 
vember 7, 1916. That from the time the indictment was returned until 
said November 7th he had no time or opportunity to give attention to 
his défense. That défendant was arraigned at Chickasha, Okl., on 
November 9, 1916, for the purpose of entering his plea to the indict- 
ment, and was notified that his trial would take place on November 
13th at the same place. That défendant caused to be in attendance at 
the place of trial the f oUowing named witnesses ; Alex A. McDonald, 



WARREN V. UNITED STATES 91 

Judge James R. Armstrong, Judge J. M. Crook, Judge Summers Hardy 
and Robt. M. Connell. That défendant could prove by each of said 
witnesses that they had been for years well and personally acquainted 
with liim, and knew his réputation as a law-abiding citizen, and that 
such réputation was good, and that each of said witnesses knew the 
réputation of défendant as a faithful, conscientious offiicer, who had 
been vigilant and able in the conduct of his office in bringing hoot- 
leggers, thieves, and ail other criminals to justice, and that he had 
held the position of county attomey for four years. That defendant's 
trial was postponed at the request of the United States attomey to 
November 14, 1916, and again postponed to November 15, 1916, on 
the same request. That ail of the above-named witnesses, in view of 
the uncertainty of defendant's case coming to trial, left Chickasha for 
their respective homes, as also did W. E. Utterback and A. M. Works, 
counsel for défendant. That said witnesses were material, and défend- 
ant could not successfully proceed to trial in their absence, nor in the 
absence of said counsel. That Judge Calvin Jones and Charlton Barks- 
dale, were présent at the time when it was alleged the défendant was 
arrested with certain béer in his possession, and that they were mate- 
rial witnesses concerning ail matters and things concerning the seizure 
of said béer. 

The statement of the défendant as above set forth was accompa- 
nied by the affidavits of Mr. Utterback and Mr. Works, explaining 
why they were obliged to leave the court. Messrs. Denton & Lee, at- 
torneys at law, presented the motion for a continuance and defended 
the défendant at his trial, which, with the exception of the return of 
the verdict, was commenced and concluded on November 15, 1915. 
The only material fact stated in the affidavit which it would hâve been 
compétent to show on the trial was that the defendant's réputation 
as a law-abiding citizen was good, and, of the five witnesses whom it 
was claimed would testify to this fact, Hardy, McDonald, Crook, and 
Armstrong were présent at the trial and testified as to defendant's 
character as a law-abiding citizen, as also did the witnesses Winchester 
and Wilbur. The United States introduced no évidence in rebuttal, 
and the défendant introduced no évidence at the trial, except as to 
his character. 

W^e cannot see how the défendant was in any wise prejudiced by 
the déniai of the motion for a continuance. The motion was addressed 
to the Sound discrétion of the trial court, and is not subject to review 
by us, unless there was an abuse of such discrétion. Isaacs v. United 
States, 159 U. S. 487-489, 16 Sup. Ct. 51, 40 L. Ed. 229. Counsel 
for défendant rely upon the case of Younge y. United States, 223 
Fed. 941, 139 C. C. A. 421 ; but an examination of that case demon- 
strates that it is not in point, as the facts shown on the motion for a 
continuance in that case were entirely différent from the facts as 
shown by the record in this case. In 9 Cyc. 177, it is said: 

"Evideuce as to the character o£ the accused is usually held by the courts 
not to be of such materiality as to constitute error in a refusai to grant a 
continuance for the purpose of procuring testlmony of such character." 



92 250 FEDERAL EEPORTEK 

And in Steele v. People, 45 111. 152, the Suprême Court of Illinois 
said that this rule was especially true in cases where the défendant had 
offered no other évidence. 

The law has wisely left the granting or refusing of a continuance 
to the Sound discrétion of the trial court. That court generally has 
knowledge of facts which do not appear in the paper case, and there- 
by is enabled to throw a searchlight upon the surrounding circum- 
stances of the case, and thus reach a conclusion in the matter in ac- 
cord with justice. It does not appear that the discrétion of the trial 
court was not wisely exercised, saying nothing about an abuse there- 
of. Défendant had ahle counsel to conduct his défense, and was not 
prejudiced, so far as appears, by the absence of Messrs. Utterback 
and Works. The case was not a complicated one, and the law and 
facts were simple. 

[6] Complaint is made of certain remarks made to the jury by the 
attorney of the United States in his opening address. The court's 
attention was called to thèse remarks at the time they were made, and 
the court fully stated to the jury that they must only consider the évi- 
dence admitted by the court at the trial, and not the statements of 
counsel. The court did not in so many words withdraw the remarks 
of counsel from the jury, but what it said to the jury in relation there- 
to was équivalent in every respect to a withdrawal; in fact, it was 
the only way in which the remarks could be withdrawn from the jury 
so far as their minds were concerned. 

[7] Finally, it is claimed that the trial court fell into the error con- 
demned by the Suprême Court in the case of Edgington v. United 
States, 164 U. S. 361, 17 Sup. Ct. 72, 41 L. Ed. 467, and by this court 
in Searway v. United States, 184 Fed. 716, 107 C. C. A. 635, and 
Perara v. United States, 235 Fed. 515, 149 C. C. A. 61. It is con- 
tended that the error above mentioned was committed by the trial 
court in refusing to charge, as requested by counsel for défendant, to 
the efïect that : 

"Evidence of an establlslied réputation for good cliaracter, if relevant to 
tlie issue, may alone create a reasonable doubt, altliough witliout it tlie other 
évidence would be eonvincing." 

This language is taken from the Edgington Case. The language of 
text-writers and courts in giving their opinions is not always the prop- 
er language in which to charge a jury. Text-writers and courts speak 
generally, and what they say may be true as an abstract proposition 
of law, but wholly misleading as applied to any particular case. But 
there was no error in the court's refusai of the charge requested, for 
the reason that on its own motion it charged the jury properly, as held 
by ail the cases cited. The court said : 

"The faet that one cliarged witli an offense bas prier to the date of its 
alleged commission borne a good reimtation as a law-abiding citizen is not a 
complète défense against such charge, for it is a matter of expérience that 
persons bearing such réputation hâve been linown, notwlthstanding that, to 
violate the law ; but such a réputation, established by the proof, sliould be 
con.sidered by the jury in arrivlng at a verdict, together with ail the other 
évidence in the case, and if, on a considération of ail the évidence, character 



THE SAN JUAN 93 

évidence Included, there lies In the mlnd of the Jury a reasonable doubt that 
the défendant is gullty as charged, then the verdict should be not gullty." 

We are of the opinion that the last half of the above statement res- 
cued the charge from what might hâve been error, and gave the law 
as favorably for the défendant as he could properly ask. 

There being no error in the record, tlie judgment below is affirmed. 



THE SAJSr JUAN. 
(Circuit Court of Appeals, Second Circuit. February 20, 1918.) 

No. 119. 

1. Seamen <g=94 — Accommodations — Construction of Seamen's Act. 

In Seamen's Act March 4, 1915, c. 153, § 6, 38 Stat. 1165 (Comp. St 
1916, § Î734), amending Act March 3, 1897, c. 389, § 2, 29 Stat. 688, and 
requlring certain space and accommodations for the crew to be provided 
on "ail merchant vessels of the United States the construction of whlch 
shall be begun after the passage of this act," the words "after the passage 
of this act" refer to the act of 1915, and not to the act of 189T, and the 
provisions are not rétroactive, and do not apply to a vessel buUt between 
1897 and 1915. 

2. SïATUTES <@=>263 CONSTEUCTION RETBOAOTIVE EfFECT. 

The intention of Congress to make statutory requirementa rétroactive 
should not be coUected by implication, unless such implication is plalnly 
neeessary. 

Appeal from the District Court of the United States for the South- 
ern District of New York; Martin T. Manton, Judge. 

Pétition by the New York & Porto Rico Steamship Company, own- 
er of the steamship San Juan, for a writ of mandamus against George 
T. Charhon and others, as Local Inspectors of Steam Vessels, etc. 
From an order granting the writ (241 Fed. 288), respondents appeal. 
Affirmed. 

Certiorari was denied by the Suprême Court. 247 U. S. , 38 

Sup. et. 582, 62 L. Ed. — . 

Francis G. Caffey, U. S. Atty., of New York City (John Hunter, 
Asst. U. S. Atty., of New York City, of counsel), for appellants. 

Burlingham, Montgomery & Beecher, of New York City (Roscoe 
H. Hupper, of New York City, of counsel), for appellee. 

Before WARD, ROGERS, and HOUGH, Circuit Judges. 

WARD, Circuit Judge. This is an appeal from an order of Judge 
Manton granting a peremptory writ of mandamus directing the local 
inspectors of steam vessels for the port of New York, and Henry M. 
Seeley, supervising inspecter of steam vessels for the Second district, 
the former to make, subscribe, verify, and deliver, and the latter to 
cause to be made, subscribed, verified, and delivered, to the petitioner 
a certificate of inspection and approval of the steamship San Juan and 
her equipment, pursuant to section 4421, Rev. Stat. U. S. (Comp. St. 
1916, § 8182), and acts supplemental to and amendatory thereof. 

^ssFot oiheT cases ses same topic & KBY-NU&IBER In ail Key-Numbered Digests & Indexes 



"94 250 FEDERAL REPOETBK 

The steamer was built at Wilmington, Del., in the year 1900, and 
is duly enrolled and licensed in the port of New Yorlc, and employed 
to trade between ports of the United States and ports of the island 
of Porto Rico. The petitioner, the New York & Porto Rico Steam- 
ship Company, owner of the steamer, on or about February 6, 1917, 
because her certificate of inspection and approval was to expire on the 
17th, appHed for a new certificate ; but the local inspectors refused to 
grant one, on the ground that the steamer failed to conform to the 
requirements of section 6 of the Act of March 4, 1915 (38 Stat. 1165, 
c. 153 [Comp. St. 1916, ,§ 7734]), known as the Seamen's Act. The 
petitioner applied to Henry M. Seeley, supervising inspector, who re- 
fused to revoke, change, or modify the décision of the local inspectors, 
and thereupon it applied to the District Court of the United States for 
the Southern District of New York for a writ of mandamus. 

[ 1 ] The steamer conf ormed entirely to the requirements of section 
2 of the Act of March 3, 1897 (29 Stat, L. 688, c. 389), when she was 
built, and down to the passage of the Seamen's Act of March 4, 1915. 
The question is whether the amendment of section 2 of the act of 1897 
by section 6 of the act of 1915 is rétrospective, and applies to ves- 
sels built bèfore the act of 1915 was passed. Section 6 of the Seamen's 
Act reads : 

"That section 2 of the act entitled 'An act to amend the laws relatlng to 
navigation approved March 3, 1897,' be and is hereby amended to read as fol- 
lows: 

"Sec. 2. That on ail merchant vessels of the United States the construction 
of which shall be begun after the passage of this act. » ♦ •" 

And then follow the changes, which increase the space in the sleep- 
ing quarters of the crew theretofore required, restrict the berths to two 
tiers, and require washing places, with hot and cold water, and a suffi- 
cient number of basins, sinks, and shower baths to be provided, and 
a suitable compartment for a hospital. The act of 1897 applied to ail 
sea-going vessels of the United States with certain exceptions not ma- 
terial in this case, and section 2 discriminated between sailing vessels 
built before and after June 30, 1898. 

The government contends that the amendment repeals by implication 
section 2 of the act of 1897, so that the act must now be read as if 
it had always read as amended. It is said that, if it were to be read 
as of 1915, vessels built between 1897 and 1915 would be subject to 
no régulation at ail. We see no difficulty in holding (if it be consist- 
ent with the intention of Congress) that the act of 1897 reads as orig- 
inally passed down to 1915 and thereafter as amended. 

Certain authorities are relied on by the government which do not, 
in our opinion, support its contention. In Ely v. Holton, 15 N. Y. 595, 
a case was pending in which a new trial had been ordered in May, 
1856. The Code of Procédure was amended in January, 1857, "so as 
to read as f ollows" — the only change being a right to appeal from an 
order awarding a new trial. The plaintifï took an appeal after the 
amendment, and the défendant moved to dismiss. The court granted 
the motion on the ground that the amendment applied only to judg- 
ments thereafter rendered. In answer to the contention that the act 



THE SAN JUAN 95 

was to be construed as if it had always read as amended, the court said 
that the provisions of the original act applied to judgments entered 
before the amendment and the provision of the amendaient apphed to 
judgments entered thereafter. 

In Moore v. Mausert, 49 N. Y. 332, the act of 1854, giving mechan- 
ics' liens, required a notice of lien to be filed in the office of the town 
clerk. It was amended in 1869, so as to require the notice to be filed 
in the office of the county clerk. One who had f urnished materials be- 
fore the amendment filed his lien after the amendment in the office 
of the town clerk. The court said that, following the Ely Case, where 
something was omitted from the original statute, it should be held to 
be abrogated from the time the amendment became operative, from 
which it followed that the notice of lien filed after the amendment in 
conformity with the original act was inefïectual. We suppose that, if 
notice of lien had been filed before the amendment, no one would hâve 
contended that the amendment made it invalid. 

In Benton v. Wickwire, 54 N. Y. 226, 229, Reynolds, C. J., said: 

"There was once, and long ago, a rule in the construction of statutes that 
an amendment of it was to be regarded as if liaving been Incorporated in and 
made a part of the original enactnient; but that rule lias been for a long 
time disregarded, and it is now settled that an amendment has no more ré- 
troactive effect than an original act upon the same subject. Ely v. Holton, 15 
N. Y. 5!>5; People v. Carnal, 6 N. Y. 4<>;5. Neither original statutes nor 
amendnients can hâve any rétroactive force, unless in exceptlonal cases the 
Législature so decîare. This case is not one, and Lhe législative amendment 
of 1871 is not at ail favorable to the plaintiffs' position." 

This language was cited with approval in Matter of Warde, 154 N. 
Y. 342, 344, 48 N. E. 513. See also Kelsey v. Kendall, 48 Vt. 24. 

Blair v. Chicago, 201 U. S. 400, 26 Sup. Ct. 427, 50 L. Ed. 801, was 
an instance where the amendment was treated as if taking efifect from 
the date of the original act, so as to be consistent with other unchanged 
parts of the act. Section 1 of the act of 1859 gave a charter of 25 
years to the Chicago City Railway Company, and section 10 gave the 
same rights as conf erred upon that company to the North Chicago City 
Railway Company. The act of 1865 amended the first section of the 
act of 1859, so as to make it read 99 years, instead of 25 years. The 
court held that the tenth section was to be read as if the original act 
gave a charter for 99 years ; in other words, the North Chicago City 
Railway Company was to bave the same rights as the Chicago City 
Railway Company. 

[2] While Congress had unquestionably the right to make thèse re- 
quirements rétrospective, its intention to do so should not be collected 
by implication, unless such an implication is plainly necessary. 20 
Per Cent. Cases, 20 Wall. 179, 187, 22 !.. Ed. 339. We do not find this 
to be the case. 

The order is affirmed. 



96 250 FEDERAL REPORTER 

In re BCIJPSH POTTLTRY CO. 

Appeal of PHILLIPS et aL 

Carcult Court of Appeals, Tlilrd Circuit. April 11, 1918. Rehearing Denled 

May 10, 1918.) 

No. 2333. 

Bankbuptcy <©=»76(1) — Petitioning Creditobs — Ciaimb op. 

A flrm eomposed of three members was dissolved on the wlthdrawal of 
one, and the two remainlng partners formed a second finn, whlch car- 
rled on the business and assumed the debts of the original flrm, There- 
after the remainlng partners, as such and as indivlduals, were adjudicated 
bankrupts. Oreditors, who had extended crédit to both llnus, proved 
against the second flrm thelr clalms agalnst both, and recelved divldends. 
Held, that such creditors could not, on a pétition setting up clalms against 
both flrms, secure an adjudication of the original flrm and the partner 
who had withdrawn. 

Appeal from the District Court of the United States for the West- 
ern District of Pennsylvania ; Charles P. Orr, Judge. 

On pétition of the Fairmont Creamery Company and otliers the 
Eclipse Poultry Company and John M. Phillips and others were adju- 
dicated bankrupts, and John M. Phillips and others appeal. Order of 
adjudication reversed. 

Elias Sunstein, of Pittsburgh, Pa., for appellants. 
N. R. Criss and Stonecipher & Ralston, ail of Pittsburgh, Pa., for 
appellee, 

Before BUFFINGTON, McPHERSON, and WOOLLEY, Circuit 
Judges. 

McPHERSON, Circuit Judge. On December 5, 1917, the District 
Court entered an adjudication against "Oliver D. Phillips, John M. 
Phillips, and E. Park Montague, partners trading as Eclipse Poultry 
Company, and John M. Phillips, individually," and from this order the 
pending appeal has been taken. The situation is unusual, as will be 
seen from the following statement of the facts: 

Two partnerships in succession hâve borne the name of the Eclipse 
Poultry Company. The first, which is the partnership now in question, 
we shall call No. 1 ; it lasted from September, 1913, to December 22, 
1914, and was eomposed of John and Oliver PhilHps and Park Mon- 
tague. On December 22 John withdrew, the firm was thereupon dis- 
solved, and the second firm was formed, also known as the Eclipse 
Poultry Company, which we shall call No. 2. The partners were Oli- 
ver Phillips and Montague, and they continued business until February 
18, 1915, when they were adjudged voluntary bankrupts, both as part- 
ners and as individuals; the docket number being 7631. Their affairs 
were duly wound up, their property was distributed, and on September 
11, 1915, they were granted a discharge from ail provable debts and 
claims that existed on the date of the adjudication. 

Among the creditors that proved their claims were the Fairmont 
Creamery Company, the Manchester Produce Company, and Weinberg 

^=3For oUier casca see same topic & KEÎY-NUMBER lu aU Key-Numbered Dlgests & Indexes 



IN KE ECLIPSK POULTRY CO. 91 

Bros. & Co. As their filed accounts show, thèse three had been 
creditors of No. 1 also to some extent. On December 22, when John 
Phillips withdrew and No. 1 was dissolved, the Creamery Company 
was a créditer of No. 1 — the f oUowing figures are ail in round numbers 
— to the amount of $2,000, the Produce Company was a créditer to 
the amount of $1,500, and Weinberg Bros. & Co. was a créditer to 
the amount of $200. Between December 22 and February 18 the 
Creamery Company became a créditer of No. 2 to the additional 
amount of $1,500; the Produce Company, to the amount of $1,700, 
including a note of $400 dated January 25 ; and Weinberg Bros. & Co., 
to the amount of $250. But, instead of confining their claims against 
No. 2 to the debts contracted by that firm for goods obtained after De- 
cember 22, thèse creditors proved against No. 2 the whole of their 
claims against both firms ; and we think it sufficiently appears — indeed 
we do not understand it to be disputed — that this was done because No. 
2 had assumed the debts of No. 1, and because thèse three creditors at 
least had assented to the assumption. Their filed accounts run without 
a break against "Eclipse Poultry Company," and in the case of the 
Creamery Company extend from August 6, 1913, to February 12, 1915 ; 
in the case of the Produce Company, from December 9, 1914, to Febru- 
ary 11, 1915 (to which the Produce Company added the note of the 
"Eclipse Poultry Company" dated January 25, 1915) ; and, in the case 
of Weinberg Bros. & Co., from December 9, 1914, to January 26, 1915. 
Moreover the schedules filed by No. 2 list thèse debts as owing by that 
firm in substantially the same amounts as the aggregate of the claims 
against both firms. The claims were proved in their entirety against 
No. 2, received their share of the assets, and were covered by the dis- 
charge. 

On May 18, 1915, while the proceeding against No. 2 was pending, 
the same three creditors filed an involuntary pétition against No'. 1 
(the docket number being 7789), basing their right to pétition on pre- 
cisely the same claims as had already been proved and allowed against 
No. 2, and setting up as the acts of bankruptcy three preferential pay- 
ments on January 22, January 25, and February 8, 1915, and a prefer- 
ential transfer on February 1 by John M. Phillips, as an individual — 
the dates of ail thèse acts being after No. 1 had been dissolved by the 
withdrawal of John. On June 1 a jury trial was demanded, but noth- 
ing further was done until May 8, 1916, when the petitioning creditors 
amended the involuntary pétition, so as to strike out the request to ad- 
judicate Oliver and Montague as individuals. On October 18 an 
amended answer was filed, setting up, inter alia, the discharge of No. 
2 as a bar to the présent proceeding. In May, 1917, the trial was had, 
a directed verdict was given in f avor of the petitioning creditors, and 
in December the court entered the order now complained of. 

This being the situation, we are of opinion that the pétition did not 
furnish the necessary support for an adjudication against No. 1. If 
the discharge of No. 2 is to be regarded as effective from February 18, 
1915, the date of the adjudication, it is clear (at least, in légal intend- 
ment) that the debts proved against No. 2 were even at that date to be 
treated as discharged, and therefore that in May, 1915, the pétition 
250 F.— 7 



98 250 FEDERAL REPORTEB 

against No. 1 was presented by three creditors, whose daims were not 
against No. 1 alone, but included also claims against No. 2 that had 
already been discharged. As we hâve stated, a mère inspection of the 
claims shows that a large part of each was contracted af ter December 
22, 1914, and was not provable at ail against No. 1, so that only the 
early part of the accounts could in any event be used against that firm. 
It is true that the whole of the accounts might be proved against No. 2, 
for No. 2 had assumed the debts of No. 1 and had its own debts in addi- 
tion-; but the whole of the accounts could not be proved against No. 
1, for that firra could not be liable for so much thereof as was con- 
tracted by No. 2 after No. 1 had been dissolved. On the papers them- 
selves, therefore, it is apparent that No. 1 could not be liable for a 
large part of the claims now set up against that firm, and for that 
reason the claims as a whole should not hâve been allowed to serve as 
a basis for the involuntary pétition now in question (No. 7789). 

Moreover, if No. 2 had assumed so much of the claims as had been 
originally contracted by No. 1, it remains to be said that this part had 
already been proved against Oliver and Montague, both as partner- 
ship No. 2 and as individuals, and had been discharged at latest on 
September 11, 1915 ; so that this part could not be used a second time 
against Oliver and Montague under the guise of proceeding against 
them as partners in No. 1. In brief, the claims supporting the pétition 
now before us do not correctly set forth the facts, and we do not see 
how they can form the necessary foundation for an adjudication. 
Each claim consists of two parts; the first part only (if either) being 
still due by No. 1, while both parts were owing by No. 2, one part by 
assumption and the other by original contract. With the second part 
the présent bankrupts hâve nothing to do, ànd therefore a claim found- 
ed on that part, and blended with a claim founded on the first part 
(which is a claim against a différent debtor, and a claim already dis- 
charged against No. 2), could not be proved against the bankrupts now 
complaining. We think this confused proceeding should hâve been 
dismissed at the end of the trial. 

The order of adjudication is reversed. 



ESSEX S. S. CO., Limited, v. LANGBEHN. 

(Circuit Court of Appeals, Fifth Circuit. January 30, 1918. Eeliearing 
Deiiied April 3, 1918.) 

No. 310E>. 

SniPPiNG <S=a38 — Chartees — Bffect of Wae. 

Where the charter of a lîritish vessel gave the charterer the privilège 
of namlng either one of three Buropean ports for discharglng, and he in 
good falth selacted and advertised Hamburg as the destination, the sub- 
séquent déclaration of war between Great Brltain and Germany, and the 
prohibition of trading with enemy ports, justified the master in refusing 
to take his vessel to Hamburg, and such refusai released the charterer 
from his contract, slnce by its ternis he could not be conipelled to sélect 
another port. 

<g=3Por other cases see same topic & KEY-NUMBBR in ail Key-Numbered Digests & Indexes 



ESSEX S. S. CO. V. LANGBEHN 99 

Appeal from the District Court of the United States for the South- 
ern District of Texas ; Waller T. Burns, Judge. 

Suit in admiralty by the Essex Steamship Company, L,imited, 
against J. H. Langbehn. Decree for respondent, and hbelant appeals. 
Affirmed. 

W. T. Armstrong, W. B. Lockhart, and Eugène A. Wilson, ail of 
Galveston, Tex., for appellant. 

Maco Stewart, of Galveston, Tex., for appellee. 

Before WALKER and BATTS, Circuit Judges, and GRUBB, 
District Judge. 

GRUBB, District Judge. The appeal involves the validity and con- 
struction of a charter party between the appellant, as owner, and the 
appellee, as charterer, for the alleged breach of which the appellant 
instituted this action against the appellee. The appellee concededly 
refused to carry out the agreement, justifying his refusai upon the 
changed conditions that arose, af ter the charter party was entered into 
and before its performance was entered upon, by the déclaration of 
war between Germany and Great Britain. The salient facts are not 
in conflict. When the charter party was entered into, the ship was in 
the West Indies, and was ordered to Galveston to load. The charter 
party was executed July 9, 1914, and the vessel reached Galveston 
August 12, 1914. By the terms of the charter party the vessel was ta 
be loaded any time between August 15th and September ISth, and she 
was ready for loading on August 18th. War was declared between 
Great Britain and Germany on August 4th, and shortly thereafter 
British ships were by proclamation prohibited from trading with ene- 
my ports, and from carrying contraband and articles declared by the 
proclamation to be conditional contraband, until the master had satis- 
fied himself that they had not an ultimate enemy destination. After 
the arrivai of the vessel at the port of Galveston, the charterer asked 
the master whether, in view of the existing war, he was prepared to 
take his ship to Hamburg, which was the port the charterer had ad- 
vertised as the destination of the ship before her arrivai. The master 
in response declined to take his ship to Hamburg, and the charterer 
then declared the charter party canceled. Hamburg was one of the 
optional ports named in the charter party. Afterwards negotiations 
by cable between the owner's agents and the charterer were conducted, 
looking to the sélection of another port than those named in the char- 
ter party ; but the parties failed to agrée on f reight rates and the ne- 
gotiations came to nothing. Finally the ship was rechartered to otlier 
parties to another port at advanced freight rates. The question pre- 
sented for our décision is whether the onset of war discharged the par- 
ties to the charter party from its performance. 

If the charterer had the right to sélect Hamburg as the port of dis- 
charge, it is manifest that the charter party was canceled by opération 
of law by the déclaration of war. That the shipowner could not 
hâve been required to take his vessel to the enemy port, in violation of 
the law of his country and with the certainty that it would be seized by 
the enemy upon arrivai there unless war had then ceased, has been 



100 250 FEDERAL REPORTEE 

determined by the Suprême Court in the case of the Kronprinzessin 
Cecilie, 244 U. S. 12, 37 Sup. Ct. 490, ôlX. Ed. 960. If the owner was 
released by the state of war from performance of his part of the char- 
ter party, it follows that the charterer was released from the obligation 
resting on him. The release must be mutual, and not optional with 
the owner alone. This would be true, though the master had not de- 
clined to sail for Hamburg, upon arrivai at Galveston. However, the 
record shows that the master declined to take his ship to Hamburg, 
and that the charterer accepted this as a termination of the charter 
party, as he had the right to do, if he had the right to insist on Ham- 
burg as a port of discharge. The charter party, in this respect, pro- 
vided : 

"Vessel to load and being so loaded shall proceed to Rotterdam; one port 
only, as ordered on signlng blUs of ladlng. Charterers hâve the privilège ot" 
ordering the vessel to Autwerp to discharge. Charterers bave the privilège o£ 
ordering the vessel to Hamburg to discharge." 

We take this to mean that the charterer is to hâve the right of se- 
lecting any one of the three ports mentioned, but only one, and if he 
makes the sélection in good faith, and without any purpose to évade 
performance of the charter party, we think the owner agrées to be 
bound by the charterer's sélection, just as if the port selected was the 
only port of discharge named in the instrument. We cannot see what 
force the conferring of the privilège of selecting on the charterer 
would otherwise bave. The charter party does not nrovide that, if 
the port selected is unavailable, the charterer shall be required to sélect 
one of the remaining two. He is given the unqualified privilège of 
selecting any one of the three ports named, and the only limitation it 
is susceptible of is that it be exercised in good faith. There is noth- 
ing in the record that impugns the good faith of the charterer in se- 
lecting Hamburg. He had listed and advertised Hamburg as the 
ship's destination in July before war was thought of, and he had 
grain in prospect for delivery there. It is true the charter party says 
that the port of discharge is to be declared on the signing of the bills 
of lading; but the master's refusai to take his ship to Hamburg was 
a waiver of this provision of the charter party. It would bave been 
futile to hâve required the charterer to procure the grain for loading, 
in view of the master's declination. 

Furthermore, the proclamation of the British government declared 
foodstuffs to be conditional contraband, and subject to seizure, if 
their ultimate destination was an enemy country, and prohibited Brit- 
ish ships from transporting foodstuffs until satisfied their ultimate des- 
tination was not an enemy country. The grain the charterer had in 
prospect for loading the vessel with was originally destined by him 
for Hamburg, an enemy port. The charterer would certainly hâve 
been excused from loading it for Hamburg, even if the shipowner 
had agreed to carry it there. He was not required, as a prudent busi- 
ness man, to assume the risk of seizure. Even had the grain been 
shipped to either of the neutral ports mentioned in the charter party, 
the original destination intended for it, by the charterer, with the 
knowledge of the ship's master, would hâve made the likelihood of 



UNITED STATES V. CHICAGO & A. H. CO. 101 

seizure, upon the theory of ultimate enemy destination, greater than a 
prudent man would want to incur. Shipments of foodstuffs were pro- 
hibited by proclamation of the British government to both Antwerp 
and Rotterdam in British vessels, and this, too, increased the UkeUhood 
of seizure. Following the test laid down by the Suprême Court, in the 
case of The Kronprinzessin Cecilie, supra, as justifying nonperform- 
ance in case of war, or probable war, we think the hazard of the sei- 
zure of the cargo, even had it been shipped to one of the other two 
ports mentioned in the charter party, was greater than a prudent busi- 
ness man would hâve cared to incur, and that the appellee was justified 
in declining to carry out the agreement. Nor do we think that the sub- 
séquent and unsuccessful endeavors to enter into a new agreement to 
charter the vessel to other ports at différent rates should be considér- 
ed as a waiver of his refusai to carry on the old charter party or his 
right to stand on his previous declination to the master. 

Concluding that the decree of the court below was correct, it is hère 
ordered affirmed. 



TJNITRD STATES v. CHICAGO & A. R. CO. 
(Circuit Court of Appeals, Seventli Circuit. February 1, 1918.) 

No. 2522. 

1. Kailroads <3==>229 — Opération — Safety Appliance Act. 

Tbe duty of a railroad compaiiy to comi)Iy witli the safety appliance 
acts is absolute, and tlie moveiiient of a car without liuving tlie sUitutory 
equipment lu proper repaif caunot be exeused unless it falls witliln tlie 
proviso of Act April 14, 1910, c. 100, § 4, 30 Stat. 209 (Cojiip. St. 1910, S 
8021). 

2. JuDGMENT <S=»273(2) — Entry — Order Nunc Pbo Tunc. 

Wliere the failure of the elerk to enter judgment in the flrst place in 
accordanee wlth the court's direction was a mère omission, it niay be 
corrected by the entry of judgment nunc pro tunc, and a writ of errer 
sned out before correction wUl after entry of the judgment nunc pro ttmc 
not be dismissed on the ground that there was uo judgment. 

3. Trial ■5=5388(1)— Findings. 

Where the stipulated facts were the ultimate facts, It Is unnecessary 
that they be rei)eatod by the court in the form of spécial flndings in order 
that tlieir sufticiency to support the judgment may be challenged. 

In Error to the District Court of the United States for the Southern 
Division of the Southern District of Illinois. 

Action by the United States against the Chicago & Alton Railroad 
Company. Judgment for défendant, and the United States brings er- 
ror. Reversed and remanded. 

Charles F. Clyne, of Chicago, 111., and Roscoe F. Walter, of Wash- 
ington, D. C, for the United States. 

William L. Patton, of Springfield, 111., for défendant in error. 

Before KOHLSAAT, ALSCHULER, and EVANS, Circuit Judges. 

(g=sFor other cases see same topic & KBY-NUMBER in ail Key-Numbered Digests à Indexes 



102 250 FEDERAL REPORTER 

ALSCHULER, Circuit Judge. The action was for recovery of 
penalty for alleged infraction of the safety appliance acts through 
movfng a freight car in tlie Bloomington-Normal yards of défendant 
in error while the uncoupHng apparatus was inoperative because the 
lock chain was disconriected from the uncoupling lever. The parties 
stipulated to waive jury and submit the cause to the court, and that 
"for ail purposes of trial and review" the material facts are as in the 
stipulation stated. The District Court found for défendant in error. 

[ 1 ] The obligation to provide and maintain the statutory equip- 
ment has been so definitely held to be absolute, even where the lack 
of it was occasioned in no degree through want of care or diligence on 
the part of the carrier, that further discussion of the proposition would 
be profitless. Tex. & Pac. Ry. Co. v. Rigsby, 241 U. S. 33, 36 Sup. Ct. 
482, 60 L. Ed. 874; C, B. & Q. Ry. v. United States, 220 U. S. 559, 
31 Sup. Ct. 612, 55 L. Ed. 582; St. L. & I. M. Ry. v. Taylor, 210 U. 
S. 281, 28 Sup. Ct. 616, 52 E. Ed. 1061. It is equally well settled that 
the only permissible exceptions to the rule of liability, where there is 
movement of the car without having the statutory equipment in prop- 
er repair, are those created by the proviso of section 4 of the Act of 
April 14, 1910. United States v. Erie R. Co., 237 U. S. 402, 35 Sup. 
Ct. 621, 59 L. Ed. 1019; B. & O. S. W. Ry. v. United States, 242 
Fed. 420, 155 C. C. A. 196 (6 C. C. A.) ; C. & O. Ry. v. United States, 
226 Fed. 683, 141 C. C. A. 439 (4 C. C. A.) ; C, B. & Q. Ry. v. 
United States, 211 Fed. 12, 137 C. C. A. 438 (8 C. C. A.); United 
States V. Trinity & B. V. Ry., 211 Fed. 448, 128 C. C. A. 120 (5 C. 
C. A.). 

The stipulation of facts, incorporated in the record by bill of ex- 
ceptions, shows that the car in question, with its uncoupling equip- 
ment inoperative through lack of repair, was moved by défendant in 
error, and it is plain that the stipulated facts do not bring the case 
within any of the exceptions of the proviso, but leave it to be governed 
by the absolute provisions of the acts. Indeed, counsel for défendant 
in error do not conteiid otherwise. This situation would require re- 
versai of the judgmént unless there is merit in the contention that 
the record does not show any judgmént at ail, or that, in any event, in 
the absence of findings of fact by the court, its gênerai finding in f avor 
of défendant in error is not assailable on tlae ground that the facts do 
not support it. 

[2] While it is extremely doubtful whether what appears in the 
transcript as a judgmént amounts to a judgmént, there was presented 
to this court a supplemental record showing that subséquent to the su- 
ing ont of the writ of error the District Court made an order for en- 
try of judgmént nunc pro tune as of the date of the purported judg- 
mént which the transcript shows. It is évident to us that the failure 
of the clerk to enter judgmént in the first place in accordance with the 
court's direction therefor at that time minuted was an omission which 
in the interest of justice may and ought to be supplied, and that it has 
been in this manner properly supplied. Judgmént thus appearing, the 
contention in that respect f ails. 

[3] There is no merit in the unsupported assertion that the stipu- 



IN KE SCHULTZ 103 

lated facts are evidentiary rather than ultimate. We consîder thera 
ultimate facts, which, without further évidence or finding, enabled the 
court to' pass judgment. The ultimate facts thus appearing, is it nec- 
essary that they should be repeated by the court in the form of spé- 
cial findings in order that their sufficiency to support the judgment 
may be challenged ? This question is well settled in the négative by au- 
thoritative and binding décisions. Supervisors v. Kennicott, 103 U. 
S. 554, 26 L. Ed. 486; Lehnen v. Dickson, 148 U. S. 71, 13 Sup. Ct. 
481, 37 L. Ed. 373. Required as we thus are to consider whether the 
stipulated facts are sufficient to support the judgment, we must con- 
clude that they are not. 

While it is apparent to us that neither the defective condition of 
the coupling nor the movement of the car while its coupling device 
was in such condition was occasioned through any neglect or want of 
due care on the part of défendant in error, if nevertheless, under the 
absolute liability which the statute imposes, the government insists 
upon recovery of the penalty, the court bas no discrétion but to pro- 
nounce the judgment which in such case the law prescribes. 

The judgment is reversed and the cause remanded. 



In re SCHULTZ. 

(Circuit Court of Appenls, Second Circuit. March 14, 1918.) 

No. 185. 

Bankkuptcy <3=:5414(3) — Disciiakoe — Failtjp.e to Keep Accounts — Evidence. 
Evidence hcld to snstain a flnding tliat tlie bankrupt failed to keep bocks 
for tlie purpose of i^reventing lus creditors from ascertaining his flnancial 
condition, and to sustain an order denying liis discharge. 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

In the matter of the bankruptcy of Max J. Schultz. From an or- 
der denying his discharge, the bankrupt appeals. Affirmed. 

Appeal from an order of tlie District Court (Manton, J., presiding), upon 
the report of the spécial mastpr denying a discharge of the bankrupt. The 
bankrupt was adjudicated on May :!, 1S)15, and on April 1, 1916, filed his pé- 
tition for a discharge. (George S. Mawhlmiey, a créditer, filed spécification 
of objection on May 17, 1016, alleging that the bankrupt, with intent to con- 
ceal liis true flnancial condition, )iad failed to keep books of account, and 
that he had conunitted a crime punishable under the Bankruptcy Act (Act July 
1, 1898, c. 541, 30 Stat. 544) in concealing certain assets, and in collecting a 
number of custoraers' accounts just bafore the flling of his i)etltion, which he 
failed to put into his schedules. The spécial master found that the charge 
of coneealment was not proi/en, but that the bankrupt liad failed to keep books 
with the puri)ose of proveuting the creditors from ascertaining his financial 
condlti<jn, and that he had sworn falsely in his schedules touchlng his assets. 

It appeared upon the hearlngs that the bankrupt dld business In a small 
way, and for his books kept only a journal and a ledger, in which were en- 
tered the gooûs which he had sold and the accounts due him. His debts he 
swore that he kept in the foriu of bills on a bill iiook, but noue were produced. 
Itom the journal or caslibook Levy, his assistant, posted the accounts receiv- 

«gssFoi otber cases see same topic & KEY-NUMBBR in ail Key-Nunibered Digests & Indexes 



104 250 FEDERAL REPORTER 

ablè Into the ledger. Among thèse accounts receivable were some flve or six, 
aggregating about $313, on which he received flve notes on the eve of bank- 
ruptcy, which he preferentially turned over to Brinn, a large créditer. Theso 
accounts were never posted in the ledger, though the word "Paid" appears op- 
posite to tiiem in the journal, or at least son^e entry of the receipt of the notes. 
The schedules were taken from the ledger and omitted any mention of thèse 
accounts. 

Robert P. L,evis and Maurice h- Shaine, both of New York City, for 
appellant. 

Thomas G. Prioleau, of New York City, for appellee. 

Before ROGERS and HOUGH, Circuit Judges, and LEARNED 
HAND, District Judge. 

LEARNED HAND, District Judge (after stating the facts as above). 
The ledger was incomplète, because the accounts on which the notes 
had been paid were not posted. Why were they not? The bankrupt 
suggests that it was because they had been paid by the notes; but 
we hâve no means of knowing what the notes were, except that Brinn, 
a witness not impressive even on paper, says they amounted to $300. 
He cannot produce any documentary corroboration of the amount. 
The six accounts appear to aggregate about $313 (folios 210, 214, 215), 
and we hâve no means of telling how much was left due upon them; 
perhaps they had been whoUy compromised by the notes. Prima facie 
some part remained due, thotigh it is left uncertain. That makes no 
différence, however, on the spécification for failing to keep bocks, 
however it might on the spécification for f aise schedules. 

The ledger being incomplète, the question remains of intent, a ques- 
tion we do not nicely scrutinize, after the spécial master and the Dis- 
trict Judge hâve passed upon it. Was there any évidence of intent? 
We think there was. The items not posted ail touched a transaction 
which was open to inquiry and rescission, the préférence of Brinn's 
claim. So far as appears, thèse were the only accounts not posted, 
and the suggestion at once is that the omission was deliberate and to 
cover the préférence. It is said that this was a foolish device, since 
the journal showed them anyway; but that touches the weight of the 
proof. Besides, knaves may be also fools. The schedules at least fol- 
lowed the ledger ; perhaps the plan at the outset was that they should. 
The acknowledged facts fit with a deliberate suppression. 

The bankrupt did nothing to remove suspicion ; his printed word 
goes far to confirm the spécial master's conclusions ; he was evasive, 
shifty, uncommunicative, apparently dishonest. If this arose from his 
lack of English, he should hâve been examined through an interpréter. 
On the record the spécial master was more than justified in his conclu- 
sion that the omissions were deliberate. 

Order affirmed, with costs. 



UNITED STATES V. CHASE NAT. BANK 105 

rNITED STATES v. CHASE NAT. BANK. 
(Circuit Court of Appeals, Second Circuit. March 13, 1918.) 

No. 190. 

1. United States <S=5S9 — Acceptance of Bikl — Répudiation. 

The United States can uo more repudiate its acceptance, and recover 
wliat its Treasurer paid on a bill with tlie drawer's name forged, tlian 
can a private person. 

2. BiLLS AND Notes ©=>206 — Forged Bills — Bill Payable to Bearee. 

Wliere a sergeant, who assisted a disburslng otlicer of the army, forged 
tlie offleer's nanie as drawer and indorser of a draft made payable to the 
order of such officer, a bank, which received the draft in due course from 
the in.stitutlon which cashed it, did not guarautee the forged indorsemeut 
of the ofticer's name, for under Negotiable Instruments Law N. Y. (Consol. 
Laws N. Y. c. 38) § 28, subd. 8, such draft was payable to bearer, as it 
was payable to the order of a fictitious or nonexisting person, and such 
fact was known to the sergeant, wlio made it so payable. 

In Error to the District Court of the United States for the South- 
ern District of New York. 

Action by the United States against the Chase National Bank. A 
judgment for défendant was entered on direction of verdict in its favor 
(241 Fed. 535), and the United States brings error. Affirmed. 

Lieutenant E. V. Sumner, United States Army, was qiiarterniaster at Ft. 
Ethan Allen, Vt., and as such a disburslng officer haviug authority to 
draw drafts or cheeks on the treasury of the United States. Sergeant Howard 
was his pay clerk, and as such known at a national bank in the nearby city 
of Burlington. Howard drew, on the usual officiai blank, a draft on the 
Treasurer of the United States to the order of Lieutenant Sumner, apparently 
signod by Sumner as quartermaster, and by hlm indorsed in blank. In fact, 
Howard forged the name of Sumner both as maker and indorser, and then 
cashed his forgery over the counter at the said bank in Burlington. That in- 
stitution, in usual cour.se, indorsed the draft to défendant (its New York cor- 
respondent), which presenled it and received payment frf)ni the Treasury. 
The forgery liaving been dlscovered, the United States brought tliis suit to re- 
cover the amouut paid, as for n payment made under mlstake as to facts. Ver- 
dict and judgment having tieen ordercd for défendant on the whole case, this 
writ was taken. 

Francis G. Caflfey, U. S. Atty., of New York City (Joseph A. Bur- 
deau and John E. Walker, Asst. U. S. Attys., both of New York City, 
of counsel), for the United States. 

Rushmore, Bisbee & Stern, of New York City (Charles E. Rush- 
more and James F. Sandefur, both of New York City, of counsel), for 
défendant in error. 

Before WARD, ROGERS, and HOUGH, Circuit Judges, 

PER CURIAM. [1] We hâve recently pointed out, in United 
States V. Bank of New York, 219 Fed. 648, 134 C. C. A. 579, U R. 
A. 1915D, 797, that the United States can no more repudiate its ac- 
ceptance, and recover what its Treasurer paid on a bill with drawer's 
name forged, than can a private person. 

[2] The distinction taken on this writ, and said to make a differ- 
ence in resuit, i s that not only was the drawer's name forged, but so 

<Ê=»For other cases see same toric & KBY-NUMBBR in ail Key-Numbered Digests & Indexes 



106 250 FEDERAL REPORTEB 

was the indorser's, and it is argned that this first, though forged, in- 
dorsement was guaranteed by the presenting bank, this défendant. 
But the name used for drawer, payée, and indorser was the same, and 
of course there was no intent on the forger's part that Lieutenant 
Sumner should either receive the proceeds of draft or know of its ex- 
istence; he did intend that the one falsely named as payée should never 
hâve any interest in the bill, and such name was inserted as belonging 
to a man to whom such a draft might naturally be made payable. 

Therefore the forged draft was payable to bearer under the Nego- 
tiable Instruments Law (in force in Vermont, New York, and District 
of Columbia), because it was payable to order of a "fictitious or 
nonexisting person and such fact was known to the person making it 
so payable." Bank v. Vagliano Bros., [1891] L. R. App. Cas. 107; 
Trust Co. V. Hamilton Bank, 127 App. Div. 515, 112 N. Y. Supp. 84; 
Snyder v. Corn Exchange Bank, 221 Pa. 599, 7Q Atl. 876, 128 Am. 
St. Rep. 780. 

Judgment affirmed. 



In re HÔBOWITZ et al. 
(Circuit Court of Appeals, Second Circuit March 13, 1918.) 

No. 184. 

1. Bankeuptct ®=>440 — Appeals — Pétition to Revise. 

Wtiile doubtless the Circuit Court of Appeals has power to revise even 
interlocutory proceedlngs in bankruptcy, such procédure Is not favored 
when the matter can be raised by appeal or pétition from the order or 
decree flnally dîsposing of the matter. 

2. Bankruptct <@=»446— Revision — Stipuiations — Discbetion of Coubt — 

"Abuse of Discrétion." 

Where, after much delay, a stipulation of record was entered into, pro- 
viding thaf'the application for discharge should be heard on a day named, 
and that, unless the trustée should then make objections, the référée would 
report in favor of the discharge, it was dlscretlonary with the District 
Court to open the trustee's default and relieve against the stipulation, so 
as to allow hlm to make objections thereafter, and impossible for the Cir- 
cuit Court of Appeals to say that there was "abuse of discrétion" ; i. e., 
unreasonable departure from consldered précédents and settled Judiclal 
custom, which is error of law. 

[Ed. Note. — For other définitions, see Words and Phrases, First and 
Second Séries, Abuse of Disci-etion.] 

Pétition to Revise an Order of the District Court of the United 
States for the Southern District of New York in Bankruptcy. 

In the matter of the bankruptcy of William Horowitz and Moe Laid- 
hold, copartners trading under the name of the Moravian Woolen 
Company. On pétition by the bankrupts to revise an order relieving 
the trustée from a stipulation relating to objections to the bankrupts' 
discharge. Pétition dismissed. 

Morrison & Schiff, of New York City (I. D. Morrison, of New York 
City, of counsel), for petitioners. 

Rosenberg & Bail, of New York City (David W. Kahn, of New 
York City, of counsel), opposed. 

SssFor other cases see same topic & KEY-NUMBER In ail Key-Numbered Digests & Indexes 



KETCHUM V. DNITED STATES 107 

Before ROGERS and HOUGH, Circuit Judges, and LEARNED 
HAND, District Judge. 

PER CURIAM. The bankrupt was presenting his application for 
discharge before the référée. There had been great delay in the mat- 
ter, and finally a stipulation was entered on the record that the matter 
should proceed on a day named, and unless the trustée as objector was 
ready, and went forward on that day, the référée should report in fa- 
vor of discharge. On the day appointed, the trustee's attorney was not 
présent, and the référée gave report recommending discharge as on de- 
fault. 

The matter coming before the District Judge for confirmation, he 
relieved against the stipulation, opened the defavdt on terms as to 
costs and expenses, and ordered a further opportunity for hearing. 
The order to that effect is the subject of this review. 

[1] Nothing but matters, both interlocutory and of discrétion, are 
hère exhibited. Doubtless for error of law there is power in this court 
to revise even interlocutory proceedings in bankruptcy ; but such resôrt 
to us is not favored when the matter can be raised by appeal or pétition 
f rom the order or decree finally disposing of the matter. 

[2] Again, whether to open the default and relieve against the stip- 
ulation was discretionary with the District Court. The delays had been 
considérable ; the expenses imposed as a condition of further opportuni- 
ty of proceeding were also considérable ; it is, of course, impossible to 
say that there was abuse of discrétion, i. e., unreasonable departure 
from considered précédents, and settled judicial custom, which is error 
of law. That the référée was quite right, in that he was bound by the 
stipulation of record, is not to the point. This pétition questions the 
action of the court. 

Pétition dismissed. No costs. 



KETOHUM V. UNITED STATES. 
(Circuit Court of Appeals, Eiglitli Circuit. Marcli 9, 1918.) 

No. 4872. 

Inteenal Revenue <S=347 — Offenses — Payment of Tax. 

In a prosecution for carrying on the business of a retail liquor dealer 
by selling and offering for sale distllled spirits, witliout liaving pald the 
spécial United States government tax as requlred by law, évidence held 
sufBclent to sustaln the conviction. 

In Error to the District Court of the United States for the East- 
ern District of Arkansas ; Jacob Trieber, Judge. 

Doc Ketchum was convicted of carrying on the business of a re- 
tail liquor dealer without having paid the spécial United States govern- 
ment tax as required by law, and he brings error. Affirmed. 

<g=5For other cases see same toplc & KEY-NUMBKR lu ail Key-Numbered Dlgests & Indezes 



108 250 FEDERAL REPORTER 

Gardner K. Olipliint, James E. Hogue, Douglas Heard, and Edward 
B. Downie, ail of Eittle Rock, Ark., for plaintiff in error. 

W. H. Rector, Asst. U. S. Atty., of Little Rock, Ark., and W. H. 
Martin, U. S. Atty., of Hot Springs, Ark. 

Before SANBORN and SMITH, Circuit Judges. 

SANBORN, Circuit Judge. The défendant below, Doc Ketchum, 
was indicted for carrying on the business of a retail liquor dealer by 
selling and offering for sale distilled spirits without having paid the 
spécial United States government tax as required by law. He was tried 
to a jury and convicted, and the only error assigned is that the court 
refused to instruct the jury to return a verdict in his favor. 

There was conclusive évidence that between the Ist day of July, 
1916, and the 2d day of September, 1916, the défendant had no license 
from the govemment, although he had one prior to and subséquent 
to that date, and he had a license dated September 2, 1916, covering the 
time from July 1, 1916, to July 1, 1917. One Trammell testified that 
he saw the défendant sell a bottle of whisky to one Morgan in Wil- 
liams' pool hall in the city of Hot Springs, Ark., on the 30th day of 
August, 1916. One Sherfield testified at the trial in November, 1916, 
that he had bought whisky of the défendant at the back of Williams' 
pool hall several times within the year preceding; that he thought he 
bought some of it about the Ist of August; that he bought whisky of 
the défendant ofif and on for two or three months before he went be- 
fore the grand jury in Hot Springs ; that it was not his money that 
bought the whisky, that old Uncle Bob Ware was a whisky drinker and 
he bought it for him ; that he was unable to go about, and he thought 
he had bought 400 bottles of whisky for him since he had been in Hot 
Springs, but he did not get it ail from Ketchum. One Tisdale tes- 
tified that he knew that the défendant ran a pool hall for Williams dur- 
ing the latter part of July and up into August, 1916 ; that he saw Sher- 
field around there at that time ; that he (Tisdale) was a police officer, 
and they were watching the movement of this whisky proposition; 
that they noticed the trips made by Sherfield ; that he noticed that the 
défendant Sherfield would go back, and then come out the back end 
of the pool room, and there would be the print of a bottle in the de- 
fendant's pocket, and then he would come back and Sherfield would 
leave, and there would be the print of a bottle in Sherfield's pocket, and 
the police officers would follow him until they came to the place where 
old Uncle Bob Ware was rooming; that he saw the défendant with 
Sherfield since the 29th of June, 1916. This was ail the évidence for 
the government. The défendant testified that he had never sold any 
whisky except when he had a license to sell it. 

The testimony which has been recited cannot be said to be insufficient 
to warrant a jury in finding, as the jury below did, that this défendant 
was engaged in selling whisky between July 1, 1916, and September 
2, 1916, while he had no license, and the judgment below must be 
affirmed. 

It is so ordered. 



AMERICAN DISTEIBUTINQ CO. V. HATES WHEEL 00. 109 

AMERICAN DISTRIBUTING CO. v. HAYES WHEEL CO. 

(District Court, E. D. MlchigaB, S. D. March 23, 1918.) 

No. 5772. 

1. Commerce <g=>8(l) — Interstate Coiqierck — Bdbdens. 

As Congress has exclusive power to regiilate Interstate commerce, state 
législation, Imposing substantial burdens on Interstate commerce, is in- 
valld. 

2. CONSTITTÎTIONAL LaW <S=348 — CONSTRUCTION OF STATUTES CONSTITUTION- 

ALIÏY. 

A statute should be construed, whenever possible, in such a way as to 
make it constitutional, rather than unconstltutional. 
.S. Commerce <S=40(1) — Interstate Commerce — What Constitxites. 

A contract whereby a foreign corporation, not authorlzed to do busi- 
ness within the state of Miehigan, agreed to become the sales agent for 
and to dispose ot tbe products of a Miehigan corporation In the several 
States, is one Involving the subject-matter of Interstate commerce, and 
wlthout the seope of state législation ; lience Pub. Acts Mich. 1901, No. 
206, as amended by Pub. Acts Mlch. 1903, No. 34, and by Pub. Acts Mlch. 
1907, No. 310, deelaring that no foreign corporation shall be capable of 
maklng a valid contract in the state vmtil it shall hâve fully compile^ 
with the requirements of the act and holds au unrevoked certificate to 
that effect, but that the act shall not be construed to prohibit any sale 
of goods or merchandlse whieh vvould be protected by the rights of In- 
terstate commerce, must be deemed inapplicable, for othervFise the act 
would be invalid. 

4. Commerce <@=40(1) — Interstate Commerce — Transactions. 

In such case, though the selling agoncy created by the contract was 
for the United States, and necessarily included the state of Miehigan, that 
was merely incidental, and the contract did not by reason thereof lose 
Its Interstate character. 

5. Contbacts <g=>10(4) — Construction — Mutuautt. 

AVhere défendant accepted plaintift's ott'er to undertake the sale of de- 
fendanfs wheels for automobiles and power vehieles, the offer prescrlblng 
the terms of the arrangement under wlilch orders were to be submitted to 
défendant, the contract is not bad for want of mutuality, for it must be 
assumed that the parties agreed impliedly, if not exprossly, that plain- 
tilï would exercise good faith and reasonable diligence in obtaining orders 
during the term of the contract. 

At Law. Assumpsit by the American Distributing Company, a cor- 
poration, against the Hayes Wheel Company, a corporation. There 
was a verdict for plaintifif, and défendant moves for judgment non 
obstante veredicto. Motion denied. 

Thomas E. Barkworth, of Jackson, Mich., for plaintiff. 
Price & Whiting, of Jackson, Mich., for défendant. 

TUTTIyE, District Judge. This matter comes before the court on 
a motion by défendant for a judgment non obstante veredicto. The 
action is assumpsit for the recovery of damages claimed to hâve been 
sustained by the plaintiff by reason of the répudiation by défendant 
of a written contract between plaintiff and défendant, providing for 
the appointment of the former as the selling agent of the latter, and 
fixing the terms of such employment. Défendant is a Miehigan cor- 

<g=>For other cases see same topio ô KEY-NUMBER in ail Key-Numbered Digests & Indexes 



110 250 FEDERAL REPOETER 

poration, engaged in the manufacture of automobile wheels in the 
city of Jackson, Mich., where it has its factory. The plaintiff is an 
Ohio corporation, and by the contract in question undertook to become 
selling agent of the défendant for the sale of its wheels throughout 
the United States. The contract, by its terms, was to continue in 
force for five years from and after the date of such contract, July 
1, 1910. On May 25, 1914, défendant repudiated this contract and 
terminated ail business relations with the plaintiff thereunder. Plain- 
tiff thereupon brought this action to recover commissions alleged to 
hâve been earned up to the date of such répudiation and damages 
alleged to hâve been sustained by reason of lost commissions which 
it vvould hâve earned during the unexpired balance of the term of the 
contract. The cause was submitted to a jury, which returned a ver- 
dict in favor of plaintifï, and défendant has filed this motion for 
a judgment non obstante veredicto. 

Although several questions were argued on the trial, ail of thèse 
except two hâve become immaterial, in view of the charge of the court 
and the verdict of the jury. The only two questions argued on this 
motion and necessary to be considered hère are the following: First, 
was this contract void because plaintifï, a foreign corporation, was 
not authorized to do business in Michigan? and, second, was such 
contract void for lack of mutuality? The contract involved was in 
the form of a letter, written by the plaintiff to the défendant, and ac- 
cepted in writing by tlie latter, and is as f ollows : 

"July 1, 1910. 

"The Hayes Wheel Company, Jackson, Mlch. — Gentlemen: We make the 
following propo.sal for conduetlng the sale of your wheels: 

"We will undertake the sale of your wheels for automobiles, and power 
vehicles of ail kinds, for the entire United States, upon the following terms 
and conditions: 

"Commissions. — On ail orders received, accepted, and shipped by your 
compauy you will pay us S% of the net sales price charged on orders. 

"AU inquiries received by you are to be referred to us. Above commission 
shall be paid to us, our suceessors or assigns, by your company, its successors 
or assigns. On ail orders for said goods, accepted and shipped by you during 
the life of this contract, said commission is to be pald between the lOth and 
15th day of each month, for ail goods paid for during the preceding month. 
It is imderstood that commissions are to be paid on collections, no com- 
missions to be paid unless collections are made. 

"Crédits. — You are to accept ail risks and make ail collections on orders ac- 
cepted by you, it being understood that ail orders taken by us shall be sub- 
mitted for your acceptance. 

"Terms of S«i!e.^Selllng priée on ail wheels is to be quoted and governed 
by you, and we are to be immediately notlfied of ail changes in price and 
market conditions. 

"Advertisinfi. — You are to stand the expense of ail advertislng, should we 
mutually décide that such advertislng is necessary. AU advertising matter 
and letters sent out by you shall include the following: 'The American Dis- 
tributing Company, gales Agents, Jackson, Mich.' 

"Expcn^es.—Your company shall not be liable for any of our expansés 
whatsoever, except such as may be mutually agreed upon. Each party shall 
advertise as it sees fit, and nelther party shall be liable for any advertising 
expansés incurred by the other. 

"Samples. — You will furnish samples for test and Inspection whenever this 
Is found necessary. 



AMERICAN DISTEIBUTING CO. V. HATES WHEEL CO. 111 

"Life, of Contract. — It is understood that thls contract is made to cover a 
period of five ycars from the date of its acceptance by you. 

"ïhis proposai, when slgned by your company, Is to hâve the full force 
and effect of a duly executed contract. 

"Respectfully subraitted, The American Dlstributlng Company, 

"By Chas. G. McCutchen, Près. 
"Aecepted by Hayes Wheel Co., by 0. B. Hayes, Près." 

[1-3] 1. Section 1 of act 206 of the Michigan Public Acts of 1901, 
as amended by act 34 of the Public Acts of 1903, being section 9063 
of the Michigan Compiled Laws of 1915, provides that: 

"It shall be unlavvful for any corporation organized under the laws of any 
State of the United States, except the state of Michigan, or of any foreign 
country, to carry on its business in thls state, until it shall hâve procured 
from the secretary of state of this state a certificate of authority for that 
purpose. To procure such certiticate of authority every such foreign cor- 
poration or association shall comply with" certain requirements therein pre- 
scribed. 

Section 6 of this act, as amended by act 310 of the Public Acts of 
1907, being section 9068 of the Compiled Laws of 1915, is as follows : 

"No foreign corporation, subject to the provisions of thls act, shall be 
capable of makiug a valid contract in this state until it shall hâve fuUy com- 
piled with the requirements of this act, and at the time holds an unrevoked 
certificate to that effect from the secretary of state." 

Section 8 of the same act, as amended by act 310 of the Public Acts 
of 1907, being section 9070 of the Compiled Laws of 1915, provides 
that this act shall not — 

"be construed to prohibit any sale of goods or merchandise which would be 
protected by the rights of Interstate commerce." 

It is conceded that the plaintiff was not thus authorized to earry on 
business in Michigan at the time of the making of the contract in 
question. It is also conceded that upon the making of such contract 
the plaintiff established an office in the state of Michigan from which 
it carried on its business of securing orders from the entire country 
for the sale of the wheels manufactured by the défendant. Défend- 
ant urgently insists that the plaintiflf was at the time of the making of 
this contract a foreign corporation doing business within the state of 
Michigan, and that, therefore, it was subject to the provisions of the 
act just cited, and incapable of making the contract in question, which 
was therefore void. It is tirged by plaintiff that the making of this 
contract constituted a part of Interstate commerce, that such contract 
was therefore not prohibited by such act, and that, if such act does 
apply to such contract, the former is an attempt by a state Législature 
to regulate and obstruct Interstate commerce and is therefore to that 
extent contrary to the United States Constitution and void. Counsel 
for both sides hâve submitted able briefs, which hâve been carefully 
examined. 

It is, of course, well settled that only Congress can regulate Inter- 
state commerce, and that no state can under any guise enact législa- 
tion the effect of which is to obstruct or substantially burden such 
commerce. McCall v. People of the State of CaUfornia, 136 U. S. 



112 250 FEDERAL REPORTER 

104, 10 Sup. et. 881, 34 L. Ed. 391 ; Crutcher v. Commonwealth of 
Kentucky, 141 U. S. 47, 11 Sup. Ct. 851, 35 L. Ed. 649; International 
Text-book Co. V. Pigg, 217 U. S. 91, 30 Sup. Ct. 481, 54 E. Ed. 678, 
27 E. R. A. (N. S.) 493, 18 Ann. Cas. 1103; Heyman v. Elays, 236 
U. S. 178, 35 Sup. Ct. 403, 59 L. Ed. 527; Rosenberger v. Pacific Ex- 
press Co., 241 U. S. 48, 36 Sup. Ct. 510, 60 L. Ed. 880; Pennsylvania 
R. Co. V. Sonman S. C. Co., 242 U. S. 120, 37 Sup. Ct. 46, 61 E. Ed. 
188; Butler Bros. Shoe Co. v. United States Rubber Co., 156 Fed. 1, 
84 C. C. A. 167; United States v. Tucker (D. C.) 188 Fed. 741 ; Star- 
Chronicle Pub. Co. v. United Press Ass'ns, 204 Fed. 217, 122 C. C. A. 
489; Coit & Co. v. Sutton, 102 Mich. 324, 60 N. W. 690, 25 L. R. A. 
819; People v. Bunker, 128 Mich. 160, 87 N. W. 90; City of Muske- 
gon V. Hanes, 149 Mich. 460, 112 N. W. 1077; Fifth Avenue Library 
Society v. Hastie, 155 Mich. 56, 118 N. W. 727. If the contract in 
question cornes within the prohibition of the statute of Michigan thus 
invoked, there can, of course, be no doubt that such prohibition not 
only obstructs and burdens the making of such contract, but actually 
destroys it. It becomes, therefore, necessary to détermine whether the 
making of such contract was an act of interstate commerce. If so, it 
was beyond the power of the state to so prohibit it, and the statute 
in question can hâve no appHcation to such contract. It is clear that 
this contract contemplated sales of goods by the défendant in Michi- 
gan to purchasers in other states, on orders to be sent from such 
States into Michigan, and accepted in the latter state, such goods then 
to be shipped from Michigan to such other states. Any such sale con- 
stituted undoubtedly interstate commerce, and could not be affected 
by législation of the state of Michigan. Robbins v. Taxing District, 
120 U. S. 489, 7 Sup. Ct. 592, 30 E. Ed. 694; Brennan v. City of Ti- 
tusville, 153 U. S. 289, 14 Sup. Ct. 829, 38 E. Ed. 719; Butler Bros. 
Shoe Co'. V. United States Rubber Co., supra; United States v. Tuck- 
er, supra; Fifth Ave. Library Society v. Hastie, supra. Indeed, as 
has been already stated, such a sale is expressly excepted from the 
opération of the statute. 

It is, however, urged that this contract was not in itself a sale in 
interstate commerce, and did not directly involve commercial inter- 
course between the state of Michigan and another state, but was 
merely a business contract made within the state of Michigan, and 
therefore subject to the requirements of such state governing the va- 
lidity of contracts. I cannot agrée with this contention. It seems to 
me that counsel overlooks the fact that the very object of such contract 
was to provide for taking orders which would form part of transac- 
tions constituting interstate commerce, to' which the making of this 
contract was merely incidental. Being, therefore, so closely related to, 
and connected with, interstate commerce, the contract was, in my opin- 
ion, itself interstate commerce. In the language of the statute previous- 
ly quoted, it was "protected by the rights of interstate commerce." 
Butler Bros. Shoe Co. v. United States Rubber Co., supra; United 
States V. Tucker, supra ; McCall v. People of the State of Calif ornia, 
supra; International Text-Book Co. v. Pigg, supra; Eleyman v. Hays, 



AMERICAN DISTRIBUTINQ CO. V. IIAYES WHEEL CO, 113 

supra; Rosenberger v. Pacific Express Co., supra. As was pointed 
out by the Suprême Court in He^'Tian v. Hays, supra : 

"In the nature of things the protoctiou against the imposition of direct 
burdens upon the right to do interstate commerce, as ofteu pointed out hy 
this court, is not a mère abstraction, altording no real protection, but is 
jiraetical and substantial, and embraccs those acts whicli are neceasary to 
the complète enjoyment of the right protected. * * * It is not open to 
controversy tiiat substance, and not forni, c(jntrols in determluing whetlier 
a particular transaction is one of interstate commerce." 

In the language of McCall v. California, supra: 

"The object and effect of his soliciting agency were to swell the volume of 
business. * * * It was one of the 'means' by which the company sought to 
increase, and undoubtedly did increase, its interstate « ♦ * traffic." 

The rule was thus stated in United States v. Tucker, supra : 

"Neither a sale nor the place of sale and delivery is alone the test of in- 
terstate commerce, nor does traiisportation, altliough an adjunct esseutlal to 
commerce, constitute a transaction Interstate commerce. A sale, the par- 
ties to which are from différent states, when such sale iiecessarlly involves 
the transportation of goods, is a transaction of interstate commerce, whether 
the contract of sale be made in the one state or the other, or made before or 
after shipment. Every negotiatlon, initlatory aud intervening aet, contract, 
trade, and dealing between citizens of any state, or territory, or tlie District 
of Columbia, with those of another political division of the United States, 
which contemplâtes and causes such importation, whether it be of goods, per- 
sons, or information, is a transaction of interstate comniei'ce." 

The same question in effect was involved in the récent case of Rosen- 
berger V. Pacific Express Co., supra. In that case the Suprême Court 
had under considération a statute of the state of Texas imposing a 
state license tax of $5,000 annually on each place of business or agen- 
cy of every express company where intoxicating hquors were deUver- 
ed and the price collected on C. O. D. shipments. This statute was 
attacked as unconstitutional, on the ground that it unlawfully bur- 
dened interstate commerce in so far as it applied to C. O. D. agree- 
ments relating to shioments from outside of Texas to that state. The 
Suprême Court of Missouri held the statute constitutional. The Unit- 
ed States Suprême Court, speaking by Mr. Chief Justice White, re- 
versed the judgment, saying, among other things : 

"The interstate commerce which is subject to the eoutrol of Congress em- 
braces the widest freedom, including, as a iiiatter of course, the right to make 
ail contracts having a proper relation to tlie subject." 

Applying thèse rules ta the présent case, I am of the opinion that 
the contract in question had such a relation to the subject of interstate 
commerce that in itself it constituted such commerce, and that, conse- 
quently, it was not subject to the provisions of the Michigan statute 
referred to. If such statute were intended to apply to the making of 
such a contract, it would be to that extent unconstitutional and void. 
Inasmuch, however, as a statute should be construed, whenever possi- 
ble, in such a way as to make it constitutional, rather than unconsti- 
tutional, I think that this statute should be held not to be applicable ta 
this contract, which seems to be within at least the spirit of the clause, 
already quoted, excepting from the opération of such statute any sale 
2.50 i'.— 8 



114 250 FEDERAL REPOEÏEU 

of goods or merchandise which would be protected by the rights of in- 
terstate commerce. United States v. Delaware & Hudson Co., 213 U. 
S. 366, 29 Sup. Ct. 527, 53 L. Ed. 836. As was said by the United 
States Suprême Court, speaking by Mr. Chief Justice White, in the 
case last cited: 

"It is elementary when t]ie constitutionality of a statute is assailed, If 
the statute be reasonably susceptible of two Interprétations, by oiie of which 
it woulcl be imconstitutional and by the other valid, It is our phiin duty to 
adopt tliat construction whicla will save the statute from constitutional in- 
flrmity." 

So construed, this statute must be held not to apply to the making 
of the contract in question. 

[4] Nor is the conclusion which I hâve thus reached affected by 
the fact that this contract, creating as it does a selHng agency for the 
entire United States, necessarily includes the state of Michigan, and 
therefore applies to' orders taken in accordance with its terms in such 
State. This is merely incidental to the main object of the contract, 
which was, as I hâve pointed out, the carrying on of opérations in in- 
terstate commerce. The fact, therefore, that some intrastate business 
might be included in the business done under the contract, would not 
change the essential character of such contract, nor render it the less 
a transaction in Interstate commerce. Crutcher v. Kentucky, 141 U. S. 
47, 11 Sup. Ct. 851, 2S L. Ed. 649. This contention must, therefore, 
be overruled. 

[5] 2. It is urged that the contract does not expressly impose any 
obligation upon the plaintiff, but only upon the défendant, and that 
therefore it is void for lack of mutuality. I hâve carefully considered 
this contention, but am unable to agrée with it. It will be noted that 
the contract took the form of a letter from the plaintiff to the défend- 
ant, in which the former made a "proposai for conducting the sale of " 
defendant's wheels. The plaintiff begins by declaring; 

'•We will undertake tlie sale of your wheels * * » for the entire 
United States upon the following ternis and conditions." 

The letter then provides for the payment of the commission men- 
tioned "on ail orders received, accepted, and shipped by" défendant. 
This clearly contemplated that plaintiff would at least "undertake" to 
secure and submit to défendant certain orders. Plaintiff also says : 

"It beîng understood that ail orders taken by us shall be submitted for 
your acceptance." 

This certainly implies an undertaking by plaintiff to take orders and 
submit them to défendant. That plaintiff regarded this letter as an of- 
f er, to become an agreement upon its acceptance by défendant, is 
shown by the concluding language, which is as f ollows : 

"It Is understood that this contract is made to cover a period of five 
years from the date of its acceptance by you. This proposai, when signed 
by your Company, is to hâve the full force and effect of a duly exeeuted con- 
tract." 

Plaintiff thus plainly expressed its désire to make a "contract" which 
should "cover a period of five years"; it being clearly the intention of 



AMEIKICAN DISTRIBUTING CO. V. HAYES WHEEL CO. 115 

the plaintifï that when its "proposai" was signed by défendant, it 
should hâve the "full force and effect of a duly executed contract." 
It would seem, therefore, that when the défendant expressly indicated 
its acceptance of this offer, by writing upon the face of such proposai 
the words, "Accepted by Hayes Wheel Company, by C. B. Hayes, 
Président," the parties understood that they had entered into a bind- 
ing contract. Each must, therefore, hâve understood that both it and 
the other party were bound, by the ternis of such contract, to do cer- 
tain things. As was said in Ellis v. Dodge Brothers, 246 Fed. 764, 

C. C. A. , in which a contention somewhat similar to that of 

défendant hère was considered and overruled : 

"In disposlng of tins case we will proceed upon tlie assumption that when 
business men negotiate with each other, and rednce the resuit of thelr nego- 
tiations to writing, and speak of that which they exécute as an agreement 
between theniselves, that the purpose was to accompllsh somethlng. ïhe in- 
strument, if it is capable of such construction, will be so coustrued as to 
make ail of its parts consistent and effective." 

The object of this contract was undoubtedly the establishment of 
business relations between the plaintiff and défendant, under which 
the former would in good faith endeavor to secure ail of the orders 
reasonably possible for the wheels manufactured by the défendant and 
submit such orders to the latter for acceptance, for which services the 
défendant would pay the plaintiff the commission agreed upon, and 
this arrangement was to continue for the period mentioned. 

I am of the opinion that by the terms of this contract the parties 
must be held to hâve agreed impliedly, if not expressly, that plaintiff 
would exercise good faith and reasonable diligence in obtaining orders 
for submission to and acceptance by défendant during the term of the 
contract, and the contract, therefore, is not open to the objection that 
it lacks mutuality. Mueller v. Minerai Spring Co., 88 Mich. 390, 50 
N. W. 319; Emerson v. Pacific Coast & Norway Packing Co., 96 
Minn. 1, 104 N. W. 573, 1 L. R. A. (N. S.) 445, 113 Am. St. Rep. 603, 
6 Ann. Cas. 973 ; Baltimore Breweries Co. v. Callahan, 82 Md. 106, 
33 Atl. 460; W. G. Taylor v. Bannerman, 120 Wis, 189, 97 N. W. 918. 
Indeed, one of the défenses urged by défendant at the trial was based 
on its contention that the plaintiff had neglected its interests and by 
failure to use proper diligence and skill had deprived défendant of 
orders which should hâve been secured, and that for this reason de- 
fendant was justified in repudiating the contract. This question was 
submitted, under proper instructions, to the jury, which found in fa- 
vor of the plaintiff. I am satisfied that this contention is without 
merit, and it is therefore overruled. 

For the reasons stated, it f ollows that the motion must be denied. 



116 250 FEDERAL EEPOETEK 

Pétition of KURTZ BRASS BED CO. et al. 

In re MANUFAOTURERS' WHOI.ESAI.E FURA'IÏURE CO. 

(District Court, E. D. Michlgan, S. D. April 1, 1018.) 

No. 3576. 

1. Bankeuptct <S=>469 — ^Costs — Allowance. 

Banlîruptcy Act July 1, 1808, c. 541, § 2, subd. 18, 30 Stat. 545 (Comp. 
St. 1916, § 9586), declaring tliat tlie bankrui)t('y court is autliorized to tax 
costs whenever allowed by law, and rentier judgment against tbe un- 
successful party, etc., and against estâtes in proceedings in bankruptcy, 
and General Order No. 34 (89 Fed. xiii, 32 C. O. A. xxxiii), deelaring 
that wlien a debtor resists adjudication, and the court after hearing 
ad,1udges tlie debtor a bankrupt, tlie petitioning créditer sliall recover 
and be pald out of the estate tlie sanie costs that are allowed to a party 
recovering in a suit in equity, should be read together, and are merely 
declaratory of the gênerai powers of courts of equity, including bank- 
ruptcy c-ourts, over the allowance and apportionment of costs. 

2. Bankruptcy <g=>474^CouBTS — Costs — Petitioning Creditob. 

In View of the broad power of courts of equity over allowance of costs, 
a court of bankruptcy may allow costs against a credltor of the bankrupt, 
who cornes in and resists adjudication; the provisions of General Order 
No. 34, relating to allowance of costs out of tlie estate of a bankrupt 
resisting adjudication, not restricting the power of the court to assess 
costs against a créditer resisting such adjudication. 

3. BANKEurTCY <g=>474^CosTS — Cbediioe Resisting Adjudication. 

It is proper for the bankruptcy court to allow costs in favor of the 
petitioning creditors against a créditer who intervened and actively op- 
posed adjudication until nearly the close of the hearing, when the 
creditor's attoruey withdrew; it appearing that the créditer had re- 
ceived a large payment shortly before the flling of the involuntary péti- 
tion against Its debtor, and that it was to its interest to defeat the ad- 
judication. 

In Bankruptcy. In the matter of the pétition of the Kurtz Brass 
Bed Company and others to hâve the Manufacturers' Wholesale Fur- 
niture Company, a Michigan corporation, adjudicated a bankrupt. 
The Wolverine Furniture Company, a Michigan corporation, filed an 
answer opposing the adjudication. On objection to that portion of 
the order of adjudication which allowed costs against both the Wol- 
verine Furniture Company and the bankrupt. Objections overruled. 

Frank Lawhead and Arthur P. Hicks, both of Détroit, Mich., for 
petitioning creditors. 

D'iekma, Kollen & Ten Cate, of Holland, Mich., for opposing cred- 
itor. 

TUTTLE, District Judge. This matter is before the court on ob- 
jections by the Wolverine Furniture Company, a créditer of the bank- 
rupt, which joined with the bankrupt in opposing the involuntary pé- 
tition herein, and which now objects to the allowance of costs against 
it in the order of adjudication. 

Promptly upon the filing of the involuntary pétition by the peti- 
tioning creditors, the bankrupt, the Manufacturers' Wholesale Fur- 

<g:=>Fo.- other cases see san-.o topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes 



PETITION OF KURTZ BRASS BED CO. 117 

niture Company, filed its answer, denying the acts of bankruptcy 
charged, and on the same day the Wolverine Furniture Company, a 
Michigan corporation, also filed an answer in the cause, opposing the 
adjudication sought. In the latter answer, said company alleged that 
it had "a provable claim, to wit, a promissory note, for the sum of $4,- 
000 due March 24, 1917, against said Manufacturers' Wholesale Fur- 
niture Company," and by such answer said créditer denied the acts 
of bankruptcy alleged, and denied that the alleged bankrupt was in- 
solvent, and averred that the latter should not be declared bankrupt. 
This answer was verified by the secretary and assistant treasurer of 
the Wolverine Furniture Company. A few days afterwards, said 
Wolverine Furniture Company filed a pétition in the cause, alleging 
that "it is necessary on the part of the Wolverine Furniture Company 
that it examine the books, accounts, papers, and files of the said al- 
leged bankrupt, in order that * * * the Wolverine Furniture 
Company may properly présent its défense under its said answer," 
and praying permission to examine said books, accounts, and papers. 
Thereafter the hearing of the issues raised by the involuntary pétition 
and answers was referred to a master, who took testimony thereon, 
extending over a period of several weeks. At this hearing the Wol- 
verine Furniture Company was represented by counsel, who conduct- 
ed a vigorous défense, repeatedly making objection to the admission 
of évidence and raising several légal défenses. 

While the bankrupt was represented by its own counsel at this hear- 
ii^g'. yet the attorney for this opposing creditor was as active in car- 
rying on the défense as the attorney appearing for the bankrupt. An 
examination of the record, constituting over 1,000 typewritten pages 
of testimony, the briefs, and the report and supplemental report of 
the master, shows that the case was bitterly contested, and it does not 
appear that the opposing creditor was any less zealous in that regard 
than was the bankrupt itself, until nearly the close of the hearing, 
when counsel for said creditor refused to proceed further with the 
examination of witnesses or in attendance in court. After the filing 
of the master's report, and the supplemental report, in which he rec- 
ommended that an adjudication should be ordered in accordance with 
the prayer of the involuntary pétition, this court filed an opinion over- 
ruling the exceptions to the latter report, and directing that said report 
should be confirmed, and "an order of adjudication entered in accord- 
ance with the prayer of the pétition in bankruptcy herein, with costs 
to petitioning creditors against the bankrupt and said Wolverine Fur- 
niture Company." No appeal was taken from this order, but the op- 
posing creditor bas objected to the portion thereof directing costs 
against it, and this proceeding is brought for the purpose of modify- 
ing the order to that extent. Briefs bave been filed by petitioning 
creditors and by the opposing creditor, which hâve been carefully ex- 
amined. 

The questions involved in this proceeding seem to be : First, bas 
a bankruptcy court, on an involuntary pétition, jurisdiction within its 
discrétion to order costs against a creditor who has unsuccessf ully op- 
posed such pétition? Second, if so, should such costs on this pétition 



118 250 FEDERAL REPOETEK 

be taxed against this opposing créditer? The amount or the items of 
costs properly taxable are not in question; the argument having beeft 
confined to the subject of the liability of the opposing créditer to 
costs. 

[1, 2] 1. By subdivision 18 of section 2 of the Bankruptcy Act, the 
bankruptcy court is authorized to "tax costs, whenever they are al- 
lowed by law, and render judgments therefor, against the unsuccess- 
ful party, or the successful party for cause, or in part against each of 
the parties, and against estâtes, in proceedings in bankruptcy." Gen- 
eral Order 34 (89 Fed. xiii, 32 C. C. A. xxxiii) is as follows : 

"In cases of involuntary bankruptcy, when the debtor resists an ad- 
judication, and the court, after tiearing. adjudges tlie debtor a bankrupt, the 
petitioning creditor shall recover, and be paid out of tlie esta te, the same 
costs that are allowed to a party recovering In a suit in equlty ; and if the 
pétition Is dismissed, the debtor shall recover llke costs against the petltioner." 

Thèse provisions must, of course, be read together, and are mere- 
ly declaratory of the gênerai power of courts of equity, including 
courts of bankruptcy, over the allowance and apportionment of costs. 
In re Chiglione (D. C.) 93 Fed. 186; In re Hines (D. C.) 144 Fed. 
147; In re Ward (D. C.) 203 Fed. 769; In re Wise (D. C.) 212 Fed. 
567; Clark-Herrin-Campbell Co. v. H. B. Claflin Co., 218 Fed. 429, 
C. C. A. . As was stated in the case last cited : 

"Power to award costs to the prevailing party, if it were not glven by the^ 
Bankruptcy Act, is inhérent in courts of equity." 

It is, of course, well settled that courts of equity hâve a broad pow- 
er over the allowance and apportionment of costs among parties to 
a suit. In the language of the court in the case of Kell v. Trenchard 
et al., 146 Fed. 245, 76 C. C. A. 611 : 

"In the fédéral practice in equity the glvlng or withholding of costs or the 
apportionment and division thereof is a matter within the discrétion of the 
court." 

Some stress is laid by the opposing creditor upon the language of 
General Order 34, already quoted, allowing the petitioning creditors, 
on contested objections to "be paid out of the estate" their costs, and 
it is urged that in such a case the petitioning creditor is confined to the 
estate of the bankrupt as the source of payment of his costs. I hâve 
already considered this contention, but am unable to agrée with it. It 
seems to me that the provision authorizing payment of such costs out 
of the estate of the bankrupt is merely cumulative, and not exclu- 
sive. Considered in accordance with the contention urged, this gên- 
erai order would clearly be inconsistent with subdivision 18 of sec- 
tion 2 of the Bankruptcy Act, already quoted, and with the gênerai 
power of the bankruptcy court, as a court of equity, to allow and ap- 
portion costs in accordance with a sound discrétion. 

Assuming that it was the intention of the Suprême Court in pro- 
mulgating the order in question to change the effect of the statute and 
rule referred to, and assuming, also, that this gênerai order could le- 
gally hâve that effect, the soundness of both of which assumptions it. 
is unnecessary to détermine, the language of General Order 34 clearly 



PETITION OF KURTZ BRASS BED CO. 119 

contemplâtes, and is applicable to, the question of costs as between 
the petitioning creditor and the alleged bankrupt only. It will be noted 
that it is "when the debtor resists an adjudication" that the petition- 
ing creditor shall recover, "and be paid out of the estate," costs. If 
the pétition is dismissed, it is "the debtor" who may recover costs 
"against the petitioner." It seems to me that the purpose and eflfect 
of this pétition is merely to fix the rights of the petitioning creditor 
and the debtor as between themselves in such a case, and to expressly 
confer on each, if successful, the right to recover costs against the 
other. Of course, after the debtor bas been adjudicated a bankrupt, 
the allowance of costs against such debtor would be valueless, unless 
the petitioning creditor should bave recourse to the estate of the bank- 
rupt; and it is therefore not strange that such right should be clearly 
and expressly created by this provision. But to enlarge the effect of 
this language by implication, so as to deprive petitioning creditor of 
the right to recover costs to which he would otherwise be entitled, 
would, in my opinion, be contrary to the spirit of the General Order 
itself , inconsistent with the well-settled power of the court over costs, 
and inconsistent' with the gênerai purpose of the Bankruptcy Act, to 
conserve, so far as possible, the assets of bankrupt estâtes. Further- 
more, such construction of this provision would deprive a creditor, 
successfully opposing an involuntary adjudication, of the power to 
recover bis costs against the petitioning creditor, and thus take away 
from a litigant the well-established right of such litigant to the bene- 
fit'of the costs allowed hy law to the prevailing party. 

Such a construction ought not, in my opinion, to be adopted, unless 
manifestly required by language much more clear and positive than 
any provision thus far called to my attention. No case bas been cited, 
and I hâve not discovered any, in support of this contention. On the 
contrary, respondent invokes and relies on a case which seems to me 
to be adverse to such contention. This case is that of In re Carolina 
Cooperage (D. C.) 96 Fed. 604. In this case it was held that, when a 
creditor of an alleged bankrupt unsuccessfully contests an involuntarv 
adjudication, costs of petitioning creditor rendered necessary by the 
opposition against such creditor, may be taxed against the latter. It 
will be noted that such a holding necessarily rests upon the theory that 
General Order 34 is cumulative merely, because, if the right and lia- 
bility to costs in such a case are derived solely from this provision, 
no costs could be taxed against an opposing creditor, even if rendered 
necessary by the opposition of the latter. I am clearly of the opinion 
that this court bas power to order costs to petitioning creditor against 
a creditor of the bankrupt opposing the adjudication, and the conten- 
tion just considered must be overruled. 

[3] 2. In view of the attitude taken by this opposing creditor in ar- 
raying itself with the bankrupt and supporting the latter in its pro- 
tracted défense, and in view of the interest which such opposing cred- 
itor apparently had in preventing an adjudication, I know of no 
good reason why this creditor should not now pay its share of the 
costs rendered necessary by the joint action of itself and the bankrupt, 
and I am satisfied from the record that this opposing creditor rendered 



120 250 FEDEEAL REPORTER 

able and effective assistance to the bankrupt in protracting the proceed- 
ings on the involuntary pétition and in delaying the adjudication. In 
view of the large indebtedness of the bankrupt to this créditer, and in 
view, also, of the receipt by the latter of a considérable payment on 
such indebtedness, shortly before the filing of the involuntary pétition, 
it is plain that such creditor was deeply interested in preventing the ad- 
judication sought. If the efforts of thèse two allied défendants had 
been successful, certainly each would hâve had a right to expect to re- 
cover its lawful costs against petitioning creditors and undoubtedly 
would hâve done so. The effect of the litigation bas been the depletion 
of the assets of the bankrupt estate to such an extent that it is doubt- 
ful whether unsecured creditors will obtain anything — at least, if ail 
of the costs are paid out of such estate. Under ail thèse circum- 
stances I can see no injustice in ordering respondent creditor to re- 
imburse petitioning creditors for its fair share of the taxable costs. 
It voluntarily became a party to the cause, and made a vigorous dé- 
fense, and should in equity accept the natural resuit of its own acts. 
It follows that the objections must be overruled, and the petition- 
ing creditors will recover their légal costs against the bankrupt estate 
and the opposing creditor jointly. As already pointed out, I hâve not 
been called upon to détermine, and hâve not considered, any question 
as to the items of costs properly so taxable. Any such question can be 
considered when it arises. 



ALÎj V. ALIj et al. 



(District Court, E. D. South Carolina. Mfireli .30, 1018. On Pétition for 
Rehearlng, May 27, 1918.) 

1. Limitation of Actions iS=o6(;{) — Application of Statute — Equity Suits. 

Code Clv. Prop. S. C. 1912, § 137, subU. 6, prescribing a slx-year limi- 
tation, does not apply to a suit to oancel a eouveyanee of South Carolina 
lands on the ground that the considération for the conveyance, whloh 
was the suppression of crlmlnal proeeedlngs, was illégal. 

2. JUDGMENT i©=>707 CONCLUSIVEKESS — PERSONS NoT PARTIES. 

Complainant to seeure a clalm of a bank against lier son, whlch It was 
recognlzed would furnlsh the basis of crlmlnal prosecution, conveyed a 
parcel of lier separate property to another son, who lu turn mortgaged it 
to the bank to seeure such clalm. Thereiipon, though complainant was 
not ousted from possession, the bank foreclosed its mortgage. Held that, 
as the bank was conversant wlth the circumstances of the transaction 
and falled to make complainant a party to the foreelosure proeeedlngs, 
complainant was not estopped thereafter to assert the Invalldlty of the 
transaction because she dld not actively intervene and resist foreelosure. 

3. Deeds <g=5l — Invalidity of Considération — Wiiat Law Govehns. 

The validity of a deed made in South Carolina, coverlng real property 
therein located, must be determlned according to the laws of that state. 

4. Deeds <g=373 — Considération — Compounding Felony. 

A conveyance of South Carolina lands, executed in that state and iii- 
teiided to prevent the Institution of a criminal prosecution against a child 
of the grautor, is based on an illégal considération according to the laws 
of that state, and is voldable. 

©=5For other cases see same topic & KEY-NUMBBK in ail Key-Numbered Digests & Indexe» 



ALL V. ALL 121 

6. Deeds ©=73— Invalidity — Compounding Felony. 

Where a mother conveyed land, whlch was part of her separate prop- 
erty, to oiie son, wlio niort^^aged it to seeure a bank upon a claiin agaliist 
another son, wlilch claim, if recognized by the parties, would serve as a 
basis for criminal proceedings against such son, and the bank was reason- 
ably charged with knowledge that the motive aetuating the mother was 
to prevent the prosecution, the conveyance is voidable on the ground ot 
the illegallty of the considération, helng really one to stlflo a criminal 
prosecution, whlch contracts are always voidable. 

6. Vendob and Purciiaseu ©=3244 — Bona I?iue Purciiase — Evidence. 

In a suit to set aslde a conveyance on the ground that the considération 
was talnted with Illegallty, because the real purposc was to prevent the 
institution of criminal proceedings against the grantor's son, évidence helil 
to show that the défendant bank, the benehciary of the conveyance, was 
chargeable with knowledge that the motive aetuating the grantor in 
maklug the conveyance was to save her son from prosecution. 

7. Deeds <®=77 — Compoundikg Felony — Relief to Parties. 

While there is a large class of cases holding that, in case contracts are 
invalld on account of illegallty of considération, the courts will leave the 
parties where thcy tlnd them, yet where a mother, to save her son froni 
criminal i)rosecutlon, conveyed her land to another, who mortgaged it 
to a bank, whlch had a claim against hlm, and the mother remained in 
possession of the land after her conveyance, and even after the bank's 
foreclosure of its mortgage, a court of equity will set aside the con- 
veyance. 

On Pétition for Eehearlng. 

8. Evidence <g=>580 — Admissirility — Te.stimony in Former Action. 

Wher(> complainant conveyed a parcel of her separate property to one 
son, and ho mortgaged it, évidence heard in the mortgage foreclosure suit, 
to whlch complalnant was not a party, is inadmissible against her. 

9. Judgment ©=3707 — Consent Decbee — Eefect as to Thikd Peksons. 

As the foreclosure deeree was by consent, and was practically nothlng 
more than a contractual matter between the parties, no judicial conclu- 
sions, elther of fact or law, belng found by the court, it Is of no force 
against complainant, so far as determinlng any rights of hers Is concerned. 

10. Deeds ©=o77 — Invalidity — Riqiit to Contest — "Executed Contract." 

An "executed contract" is one which has been so entirely performed by 
both parties that nothing remains to be done by elther; hence a convey- 
ance by complalnant to one son, who mortgaged the premises to défend- 
ant, is not an executed contract, where complainant remained in posses- 
sion, and she may attack the conveyance on the ground that it was made 
to stlfle a criminal prosecution against another son. 

[Ed. Note. — For other définitions, see Words and Phrases, First and 
Second Séries, Executed Contract.] 

In Equity. Bill by T. Gertrude Ail against Harry W. Ail and the 
National Bank of Savannah. Deeree for complainant. 

James A. Willis, of Barnwell, S. C, John W. Vincent, of Hampton, 
S. C, and C. Carroll Simms, of Barnwell, S. C, for plaintiff. 

McCullough, Martin & Blythe, of GreenviUe, S. C, and Garrard & 
Gazan, of Savannah, Ga., for défendants. 

SMITH, District Judge. This is a proceeding of an équitable char- 
acter, originally instituted in the court of common pleas for Barn- 
well county on January 4, 1917, and removed from that court to this 
court by the défendant, on the ground that there was a separable con- 

«sssFor other cases see same toplc & KEY-NUMBBR in ail Key-Numberea Digests & Indexes 



122 250 FEDERAL REPORTER 

troversy between the complainant, T. Gertrude Ail, a citizen of South 
Carolina, and the défendant the National Bank of Savannah, a citi- 
zen of Georgia. The défendant the National Bank of Savannah has 
duly answered in this court, the testimony has ail been taken upon 
the issues in the cause, and the cause, being ripe for a hearing, has 
been heard; counsel for both sides having appeared and been heard. 
The facts are as follows: 

One John E. Ail, the son of the plaintiff, T. Gertrude AU, who had 
been carrying on business in the city of Savannah, was in August, 1910, 
very heavily indebted to the défendant the National Bank of Savan- 
nah. This indebtedness had been contracted by John E. Ail, who was 
carrying on business, together with his father, J. H. C. Ail, under the 
firm name and style of J. H. C. Ail & Son. A large part of the indebt- 
edness due by the firm of J. H. C. AU & Son or John E. Ail to the Na- 
tional Bank of Savannah had been contracted under circumstances 
which were stated to involve the élément of criminal liability on the 
part of John E. AU. According to the testimony John E. Ail had pro- 
cured from the bank a large loan on the faith of the pledge of bills of 
lading covering what purported to be a large number of baies of cot- 
ton, but which were in fact baies of what are commonly known as lin- 
ters ; that is, a cotton product of a very inferior and cheap sort, which 
is distinguished by the word "linters," as against cotton, and the loss 
of the bank by reason of this alleged fraudulent misrepresentation 
was very large. The action of John E- Ail in this matter seems to 
hâve been considered by John E- Ail himself, and by his father, moth- 
er, and brothers, and also by the bank officiais and the bank counsel, 
as being one which subjected him to criminal prosecution and con- 
viction. 

Under thèse circumstances suggestion seems to hâve been made to 
the complainant herein, T. Gertrude Ail, through her husband or sons, 
brothers of John E. AU, to give some security out of her own sep- 
arate property to the bank in order to stop ail criminal prosecution. 
At any rate, at conférences held by the bank officers and Mr. Gazan, 
the bank's counsel, with John E. AU, and his brother, Percy AU, the 
suggestion was made by one of the latter that some money or security 
for the bank might be obtained through the mother of John E. AU. 
Thereupon Mr. Jacob Gazan, one of the attorneys for the défendant 
the National Bank of Savannah, went to AUendale, the résidence of 
Mrs. AU, and had an interview with J. H. C. AU, the father, and his 
wife, the présent complainant, T. Gertrude AU. There is a conflict 
of testimony as to what passed at that interview, but the resuit was 
that Mr. Gazan understood that Mrs. AU agreed to exécute a mort- 
gage on the property to secure $15,000 of John E. AU's indebtedness 
to the bank, and returned to Savannah and prepared notes to the ex- 
tent of $15,000 to be signed by Mrs. T. Gertrude AU, together with 
her mortgage on the premises referred to in the bill of complaint, 
taken to secure those notes. Mr. Gazan then sent those papers back 
to the Ails, at AUendale, for exécution; but the Ails declined to 
exécute them until the papers were submitted to Mr. J. O. Patterson, 
a lawyer in Barnwell, and thereupon Mr. Gazan again left Savannah 



ALL V. ALL 123 

and went to Barnwell, where he met Mr. Ail in the office of Mr. Pat- 
terson. 

The resuit of the submission to Mr. Patterson and the discussion 
was that the method adopted to carry out the plan of giving to the 
hank the benefit of any property Mrs. Ail consented to give was that 
she should convey what was called the "river plantation," as de- 
scribed in the bill of complaint herein, to another son by the name of 
Harry W. Ail, and that Harry W. Ail should then exécute the mort- 
gage to the bank, thus avoiding any claim against Mrs. AU over the 
value of the land mortgaged. This plan was carried out. Mrs. T. 
Gertrude AU executed the deed of conveyance of the property to 
her son, Harry W. AU, and Harry W. AU, having that deed of con- 
veyance made to him, then went to Savannah and executed notes to 
the National Bank of vSavannah for $15,000, and gave a mortgage of 
the property conveyed to him by bis mother to secure those notes, 
under an agreement that the bank would give him $15,000 for those 
notes, which he would immediately apply on account of the indebted- 
ness of John E. AU to the bank. This was ail carried out. The notes 
and mortgage were executed and delivered in Savannah to the bank. 
The check for $15,000 was given to Harry W. AU, which he imme- 
diately, in the présence of the counsel for the bank, indorsed back to 
the National Bank of Savannah. The resuit of ail thèse papers was 
that the bank parted with no money at ail, but that it obtained the 
benefit of the security to the extent of $15,000 on this property of Mrs, 
AU to secure that much of the indebtedness of John E. AU to the bank. 
In addition, the mortgage as executed was not only to secure this 
Îpl5,000, but purported to secure also ail other indebtedness of J. H. 
C. AU & Son to the bank. The bank and its counsel had fuU knowl- 
edge of ail thèse facts, that is, the method taken for making this 
mortgage, and that the money, when paid to Harry W. AU, was in 
pursuance of a prior understood agreement that he would immediately 
deliver the check back to the bank to be credited on the indebtedness 
of John E. AU. 

Thereafter, Harry W. AU having defaulted in payment of the 
notes, the bank instituted proceedings of foreclosure in this court for 
foreclosure and sale of the property. To thèse proceedings Harry W. 
AU was the sole défendant; Mrs. T. Gertrude AU not being made a 
défendant to those proceedings. Those proceedings went to decree 
of foreclosure and sale, and under the decree of foreclosure the prop- 
çrty was put up for sale and bought in by the National Bank of Sa- 
vannah. From ail the testimony it appears as if the possession of the 
plaintiff, T. Gertrude AU, to' the land bas never really been disturbed ; 
that she has remained ever since, and now is, in the same possession 
of the property that she had at the time she executed the deed of con- 
veyance to her son Harry W. AU. 

The complainant has now instituted thèse proceedings, alleging that 
the deed of conveyance executed by her to her son Harry W. AU 
was illégal, nuU, and void, as having been made without considération, 
or rather made for an illégal considération, viz., in order to prevent 
the criminal prosecution of her son John E. AU, and that the bank 



124 250 FEDERAL RRPORTEB 

was fully aware of the circumstances, and took the mortgage and pur- 
chased at the foreclosure sale with full knowledge that the mortgage 
given to Harry W. AU was given on land which had been conveyed to 
Harry W. Ail for an illégal considération by the plaintiflf; the con- 
veyance to Harry W. AU being only part of the plan ta mortgage 
the land to the bank. The National Bank of Savannah, tlie défendant, 
dénies that it ever made any threats or représentations for the purpose 
of having the deed and mortgage executed, and allèges that the deed 
of the plaintiff and the mortgage of Harry W. Ail were made solely 
for the purpose of enabling John E. Ail to make a payment on 
his indebtedness to the défendant. 

[1,2] The défendant the National Bank of Savannah sets up fur- 
ther that the complainant, having failed to intervene in the foreclosure 
proceeding against the défendant Harry W. Ail, is now estopped from 
bringing a proceeding to annul the deed made by her for illégal pur- 
pose, and that the plaintiff is also barred by the statute of limitations 
(Code Civ. Proc. 1912, § 137, subd. 6), inasmuch as this proceeding 
was not commenced within six years from the date of the deed. In the 
opinion of the court the défense of the statute of limitations and the 
défense of estoppel for failure of the complainant herein to intervene 
in the foreclosure suit are not vvell founded. The statutory period 
of six years prescribed by the Code of Procédure of South Carohna 
does not apply to équitable proceedings on a claim of the présent 
character, and there was no obligation on the part of the complain- 
ant, T. Gertrude Ail, actively to intervene, and cause herself to be 
made a party to' the foreclosure proceeding against Harry W. Ail, 
when the bank, fully aware of ail the circumstances, had failed to 
make her party défendant. 

[3, 4] The true issue is as to whether, under the circumstances of 
this case, the considération operating to make Mrs. T. Gertrude AU 
exécute the deed to her son Harry W. AU was an illégal considération. 
As ail the proceedings were inter partes, and the bank was aware 
of ail that was done, it does not stand in any wise in the position of 
a third party claiming the benefit of having parted with value without 
notice. The question is whether or not the considération was invalid, 
because illégal, and then whether the bank is bound by any illegality 
existing in the présent case. There is no doubt that at law a contract 
or payment made by a third party for the purpose of compounding 
a felony, or of stopping the criminal prosecution of another, constitutes 
a contract which is voidable. The ground upon which it is voidable, 
however, according to the adjudicated cases is based upon two sep- 
arate reasons : 

First, a large class of cases places it upon the effect of duress ; 
that is to say, that it is voidable, because it is a contract obtained under 
duress of actual compulsion, or of duress per minas. The making of 
a note for the payment of a sum of money, or the mortgage of a 
pièce of land by a third person on behalf of one who is at the time 
in prison under a criminal charge, or under threat of criminal prose- 
cution for the purpose of procuring his release, or of stopping the prose- 
cution, or of compounding the crime, is declared to be made under a 



ALL V. ALL 125 

species of duress, and to be voidable. The claim of duress is not lim- 
ited to the party charged himself, but is extended to persons standing 
in a position near and dear to him, such as that of a husband to a 
wife, a parent to a child, a brother to a sister, or any one standing 
in such close relationship that in the opinion of the court the grief 
and appréhension of what is likely to fall upon one near and dear 
to them would deprive them of the free action of the mind. In thèse 
cases much dépends upon wliat is termed the sufficiency, or the exist- 
ence, of the duress, and the mère fact of giving an obligation or 
security under such circumstances has not alvvays been held sufficient 
to avoid a contract. The court has reserved to itself the right of de- 
termining under the circumstances of the case whether or not there 
was such a duress as impaired or affected the free action of the con- 
tracting party. 

Second, there is a large class of cases, however, which places 
the invalidity of the contract upon another ground, that is, upon 
the ground of the contract being illégal in itself as against public 
policy. It is put in the same class as contracts made for the purpose 
of compounding a felony, which are unlawful in themselves, as being 
against public policy. A similar class exists in cases of contracts 
vtoid for usury, or where the considération is the permitting of illicit 
sexual relations, or any class where the considération is held as void 
as against public policy or morals. In such cases there is no question 
of duress existing, but the whole question is whether a contract under 
the circumstances was one forbidden upon the grounds of public 
policy. Such last class appears to be the one including cases like the 
présent under the law of the state of South Carolina. According to 
the adjudicated cases in that state, it is not a question of duress, but 
a question of the illegality of the considération of the contract. It 
seems clearly decided that a contract made by a third party for the 
purpose of preventing the criminal prosecution of another is illégal, 
null, and void as against public policy. Corley v. Williams, 1 Bailey 
(S. C.) 588; Williams v. Walker, 18 B. C. 583; Groesbeck v. Mar- 
shall, 44 S. C. 543, 22 S. E. 743; Bleckley v. Goodwin, 51 S. C. 362, 
29 S. E. 3 ; Bankhead v. Shed, 80 S. C. 253, 61 S. E. 425, 16 L. R. A. 
(N. S.) 971, 15 Ann. Cas. 308. 

The deed made by Mrs. Ail is a South Carolina contract executed 
by her in South Carolina, and covering real estate situated in the 
state of South Carolina, and is therefore subject to construction ac- 
cording to the laws of South Carolina, and in the opinion of the court, 
if the considération moving Mrs. Ail in the exécution of this deed was 
that of preventing a criminal prosecution to be instituted against 
her son John E. Ail, the considération was illégal. 

[5j 6] As to whether or not this considération was the one moving 
Mrs. T. Gertrude Ail would not appear to be open to much question, 
so far as the testimony on behalf of the plaintiff is concerned, for, 
according to the testimony of herself, her husband, and her sons, 
she was induced to make the conveyance under the appréhension that, 
unless she did so, her son John E. Ail would be subjected to criminal 
prosecution. There is no sufficient testimony in contradiction to show 



126 250 FEDERAL REPOIITER 

that the moving cause to her was any désire tnerely to pay her son's 
debts. The value of the property seems to hâve been much less than 
sufficient to pay ail the debts, and there is no évidence that she was 
actuated by any hope that by making a sacrifice or stripping herself 
she could free her husband and son of debt. Something more than 
this, however, appears to be requisite ; that is, whatever the consid- 
ération moving Mrs. Ail, was the National Bank of Savannah in any 
wise a party to or cognizant of it? 

On this point there is express and flat conflict of testimony. J. H. 
C. AU, the husband of the complainant, and her son, Percy Ail, testify 
explicitly that Mr. Gazan, the attorney for the National Bank of 
Savannah, told them that they were going to prosecute John E. AU 
criminally for obtaining money under false prêteuses, and Mr. Percy 
Ail also testifies that he had been sent for to meet Mr. Gazan and 
the cashier of the National Bank of Savannah at their ofhce, and 
that then and there he was told that his brother John E- Ail was short 
a considérable sum of money, and that they intended to institute crim- 
inal proceedings against him, and that unless something was done 
immediately prosecution would begin. This Mr. Gazan as explicitly 
dénies, and dénies that he ever at any time discussed or made men- 
tion of any intended criminal prosecution of any kind against John 
E. Ail. The circumstances of the case appear to show, however, that 
Mrs. Ail had no reason whatsoever for permitting this mortgage to be 
given to the bank, unless either to make a payment on account of lier 
son's debt, by adopting it herself to that extent, or to give this security, 
so as to save him from criminal prosecution, and there appears, also, 
to hâve been some discussion about the matter, for Mr. Gazan tes- 
tifies that, at the second meeting between Mr. Gazan and the Ails in 
Barnwell, the elder Ail, J. H. C. Ail, said that before he closed the 
matter he wanted a writing that there would not be any prosecution 
of his son, to which Mr. Gazan answered that he had never discussed 
prosecution with any one, and that, if that was the attitude of Mr. 
Ail, they would stop where they were. It is difficult exactly to un- 
derstand this, for in efïect the bank was obtaining security for a 
debt for which it possessed no security; they were obtaining some- 
thing for nothing, and to stop right there was to stop upon some 
proposition that the bank was to obtain something; so it would ap- 
pear that there was in the minds at least of the parties an idea that 
there was involved with this matter some question in connection with 
the criminal liability of John E. AU. The cashier of the bank at the 
time, Mr. Bloodworth, and Mr. Garrard the other member of the 
firm of Garrard & Gazan, the counsel for the bank, in their testimony 
make it appear that at the time and prior to the exécution of the 
deed by Mrs. AU, and prior to Mr. Gazan's trips to AUendale and 
BarnweU, the officers of the bank were under the belief that John 
E. AU had committed an offense for which he could be prosecuted 
criminally. The parties connected with the transaction seem to hâve 
ail had the knowledge and belief that the acts of John E. AU in his 
dealings with the bank subjected him to a criminal prosecution. 

Testing the case from the testimony for the bank itself, and assum- 



ALL V. ALL 127 

ing that, as testified by Mr. Gazan and Mr. Bloodworth, no threat 
or intimation, direct or indirect, was made by any of the bank offi- 
ciais, or any of their counsel, to Mrs. Ali, or any of the Ails, that 
unless some payment was made John E. Ail would be prosecuted crim- 
inally, yet the knowledge that such prosecution was possible was in 
the minds of ail, and in that state of mind of ail parties the ofScers 
of the bank took an active, not a merely passive, part in procuring the 
conveyance from Mrs. Ail. From another circumstance it does ap- 
pear that the officers of the bank took an active part in arranging the 
procuring of the security. According to the notes and mortgage as at 
first prepared by Mr. Gazan to be signed by Mrs. AU, and which were 
in pursuance (according to Mr. Gazan's testimony) of Mrs. All's un- 
dertaking to secure $15,000 of the indebtedness of J. H. C. AU & 
Son, and which $15,000 represented the entire amount to which ac- 
cording to bis testimony Mrs. AU was wUling to go in mortgaging 
the place; yet when the deed was made to Harry W. AU, although 
that was made as a method of carrying out what Mrs. AU was under- 
stood to be willing to do, Harry W. AU, in Savannah, having this 
deed in his possession, in the papers prepared by the counsel of the 
bank, executed a mortgage to secure not only this $15,000, but also 
the entire indebtedness of J. H. C. AU & Son to the bank; so [as 
that, when the mortgage was foreclosed, it was not foreclosed to 
subject the land to the payment of $15,000, but to subject it to the 
payment of $28,681.22, which, with interest, amounted at the date of 
the decree of sale to $39,728.26. 

There are two questions of légal and équitable import to be con- 
sidered in this matter. One is whether the requirement and rule of 
public policy makes a contract given or considération paid, which is 
brought about by the appréhension in the mind of the grantor that, 
unless the contract be made or the considération be paid, a criminal 
prosecution will be instituted — is that alone sufficient to invalidate 
the transaction? This would mean, if carried to its logical extrême, 
that whenever an obliger bas paid or contracted to pay under circum- 
stances which rendered him or another liable to criminal prosecution 
if no such action was taken, then no contract given by any one for 
the purpose of assisting another by paying or securing a part of his 
debt could be given when a criminal liability existed in the incurring of 
the debt, except with the possibility that it might be thereafter de- 
clared to be void for illégal considération. Suppose the case of the 
défalcation by an employé, although the employer might not intend 
or wish any criminal proceedings, although he might be even willing 
to stand the loss rather than subject his guilty employé to punish- 
ment, yet nevertheless, if stung or moved, either by mortification or 
affection for the person through whom the défalcation occurred, some 
friend or relative of the defaulting party may désire to make good 
the loss; must the original creditor refuse to receive any such security 
or payment because he can only receive it at the risk of being there- 
after compelled to cancel or ref und if the considération was an illégal 
one? The argument ab inconvenienti is very strong against the law 
intending any such conclusion. 



128 250 FEDERAL REPORTER 

On the other hand is the argument that the contract in such cases 
falls in the category of contracts and considérations forbidden from 
motives of high public policy. It falls in the same category as usurious 
contracts, or contracts based upon unlawful considérations, such as 
illicit sexual relations, or doing any other act forbidden by law, which 
are sometimes voidable contracts even in the hands of third parties. 
The objection may not be to the existence of duress, improper in- 
fluence, or oppression in any particular case. It is to the possibility 
of the misuse the permitting of such contracts may lead to. The 
duress may be potent, and yet so subtle, indirect, and concealed, as 
emanating from the party benefiting, that it may be impossible to 
establish it, and unless the rule be a gênerai one, that the contract it- 
self be invalid from public policy, the contract would be effective, 
although well within the rule of public réprobation. 

The law for its own purposes, independent of the position of the 
individual, déclares that the appréhension and fear of criminal pro- 
ceedings and punishment should not be permitted to act knowingly, 
directly or indirectly, for the purpose of extorting or inducing pay- 
ments or contracts in order to prevent such prosecution; that tiie 
mère circumstance of such a considération like the élément of usury 
in a contract will so taint the whole transaction as to make it illégal 
and unenforceable. Whilst it may be very commendable and proper 
from every moral point of view that a relation, a father or a mother, 
should be willing to strip themselves bare to conceal the disgrâce of 
a son, yet is it in a correct view of the law proper that such a sac- 
rifice as should from public motives be permitted when it may stifle 
the prosecution of a criminal and entail the pauperization and the be- 
coming a pubHc burden of one, in order to shield another from pun- 
ishment ? 

In considering the matter a mass of décisions of the varions states 
bave been gone over, which for this decree need not be hère referred 
to. Those that place the rule upon the ground of duress as it may 
exist in each particular case need not be considered, under the law in 
South Carolina that the contract is void not because procured by 
duress, but because of the illegality of the considération on grounds 
of public policy. The reason for its illegality is rather figuratively 
stated in Collins v. Blantern, 2 Wils. C. P. 347 : 

"Thls is a contract to tempt a man to transgress the law, to do that which 
is injurions to the eommnnity. It is vold by the common law ; and the 
reason why the common law says such contracts are void is for the public 
good. You shall not stlpulate for iniqulty. AU writers upon our law agrée 
in this: No polluted hand shall touch the pure fountains of justice." 

The meaning of which, according to modem practical jurisprudence, 
is that no one knowingly deriving a benefit in the way of an obligation 
to him given by another, under circumstances prohibited by public 
policy as injurions to the common weal, will be permitted to enforce 
that obligation in a court of justice. The décision that on ail principles 
of reason seems to the court to lay down the proper rule is the Eng- 
lish case, which was first decided by the Chancelier below and report- 
ée under the style of Bayley v. Williams in 4 Giff. 658. It was car- 



ALL V. ALL 129 

ried on appeal before the law lords in the House of Lords, and re- 
ported as Williams v. Bayley, L,. R. 1 H. L. 200 (6 English Ruling 
Cases, 455). The opinions were delivered by the Lord Chancellor 
(Lord Cranworth), Lord Chelmsford, and Lord Westbury, ail good 
lawyers and judges. The case as stated in the syllabus is as fol- 
lows: 

"A son earried to bankers, of whom he, as well as hls father, was a cus- 
tomer, certain promissory notes with hls father's name iipon tlieni as in- 
dorser. ïhese inclorsements were forgeries. On one occasion the father's at- 
tention was called to the fact that a pmmissory note of hls son, \\'ith hls 
(tho father's) namo on it, was lying at the baukers' dlshonored. He seemed to 
hâve communieated the fact to the son, who Inimediately redeemed it; but 
there was no direct évidence to show whether tlie father did or did not really 
nnderstand the nature of tlie transaction. The fact of the forgery was 
afterwards dlscovered; the son did not deny It; the banlcers insisted (thougli 
without any direct threat of a prosecution) on a settlement, to whlch the 
father was to be a party ; he consented, and executed an agreeraent to make 
an équitable mortgage of hls property. The notes, wlth the forged indorse- 
ments, were then delivered up to him. Held, that the agreement was invalld. 

"A father, appealed to under such olrcumstances to take upon himself a civil 
llabllity with the knowledge that, unless he does so, his son will be exposed to 
a crimlnal prosecution, wltli a moral certainty of a conviction, even though 
that Is not put forward by any party as the motive for the agreement, Is not a 
free and vohuitary agent, and the agreement he makes under such circum- 
stances is not enforceable in equlty." 

The opinion as delivered by Lord Westbury contains much that is 
directly applicable to the présent case, viz. : 

"There are two aspects of thls case, or rather two points of view, in which 
it may be regarded. One of them is; Was the plaintlfC a free and voluntary 
agent, or did he give the securlty in question under undue pressure exerted by 
the défendants: That regards the case with respect to the plaintlfC alone. 
The second question regards the case with référence to the défendants alone. 
Was the transaction, takeu independently of the question of pressure, an 
illégal one, as being contrary to the seltled rules and princlples of lawV" 

The évidence showed that the bankers knew that the son of Bayley 
had committed a forgery for which, when convicted, the punishment 
was transportation for life; that ail parties were conscious of that 
fact, although the bankers and their solicitors expressly disclaimed 
considering any matter of criminal prosecution, and declared they 
could not be parties to compounding a felony. Lord Cranworth, the 
Chancellor, was of opinion that the agreement was void on both ques- 
tions, both as in effect having been procured from a father under the 
duress of f ear for his son and because : 

"I do not thlnk that a transaction of that sort would bave been légal, even 
if, instead of being forced on tlie father, it had been proposed by him and 
adopted by the bankers." Now, is the agreement in question, "or is it not, 
one the object of which is to stifle a criminal prosecution? If there be any 
case in whlch that character can be properly given to an agreement, I thlnic 
thls is such a case, and therefore in my opinion the decree Ibelow] is per- 
fectly right." 

Says Lord Westbury on the first question : 

"The bankers admit, most clearly and dlstinctly, that they ail knew it was 
a case of transportation for life. It is perfectly clear that they did not pre- 
250 F.— 9 



130 250 FEDERAL HBPOETEE 

tend that the father was liable. What remalned, then. as a motive for the 
fatber? The only motive to Induce hlm to adopt tlie debt was ttie hope 
that by so doing he would relieve his son from the inévitable conse<3uences 
of his crime. The question, therefore, my Lords, is wliether a father, ap- 
pealed to under such circunistanees to talie upon himself au aniount of 
civil liability, with the lînowledge that, unless he does so, his son will be ex- 
posed to a criminal prosecution, with the certainty of conviction, can be re- 
garded as a free and voluntary agent. I hâve no hésitation in saying that no 
man is safe, or ought to be safe, vvho takes a security for the debt of a 
félon, from the father of the félon, under such eircmnstances. A contract to 
give security for the debt of another, vk-hich is a contract witliout consid- 
ération, is, above ail things, a contract that should be based upon the free 
and voluntary agency of the indlvidual who enters into it. But it is clear 
that the pov/er of considering whether he ought to do it or not, whether It is 
prudent to do it or not, is altogether taken away from a father who is 
brought into the situation of either refusing, and leaving his son in that 
perlions condition, or of taking on himself the amoimt of that civil obliga- 
tion. I hâve, therefore, my Lords, in that view of the case, no difflculty in 
saying that, as far as my opinion is concerned, the security given for the debt 
of the son by the father under such circumstances was not the security of a 
man who acted with that freedom and power of délibération that must un- 
doubtedly be considered as necessary to validate a transaction of such a de- 
scription." 

And on the second question: 

"My Lords, there remains the other aspect of the case, M'hich is this: Was 
the transaction, regarded independently of pressure, an illégal one, as being 
contrary to the settled rules and principles of lawV" 

And he proceeds, af ter stating the facts : 

"Now, such being the nature of the transaction, iny Lords, I apprehend the 
law to be this, and unquestionably it is a law dietated by the soundest consid- 
érations of policy and morality, that you shall not make a trade of a felony. 
If you are aware that a crime bas been committed, you shall not couvert that 
crime into a source of profit or beneflt to yourself. But that is the position 
in which thèse bankers stood. Tliey knew well, for they liad before them the 
coufessing criminal, that forgeries had been committed by the son, and they 
converted that fact into a source of beneflt to themselves by getting the 
security of the father. Now, that is the principle of the law and the policy 
of the law, and it is dietated by the highest considérations. If men were 
permltted to trade upon the knowledge of a crime, and to couvert their privi- 
ty to that crime into an occasion of advantage, no doubt a great légal and 
a great moral offense would be committed. And that is what, I apprehend, the 
old rule of law intended to convey when it embodied the principle under words 
which hâve now somewhat passed into désuétude, namely, 'misprision of 
felony.' That was a case when a man, instead of performing his public duty, 
and giving information to the public authorities of a crime that he was 
aware of, concealed his knowledge, and rather converted It into a source of 
émolument to liimself. It is impossible, therefore, if you look at this matter 
wholly independently of the question of pressure, and confine your attention 
to the act of the bankers alone, not to come to the conclusion that a great 
dellctum was committed when the transaction is viewed simply with référence 
to the course which they took. 

"I asked, in the flrst place, were you not well aware that thèse bills were 
forgeries? That is perfectly true. Did you not obtain an additional advan- 
tage and benefit — in fact, the payment of your debt — by trading with thèse 
bills? That is undouhtedly true. Were you not very well aware that, when 
you so traded with thèse bills, you would either prevent the possibility of a 
prosecution, or render the possibility of a prosecution so remote, that It could 
hardly be expected to succeed? That was tbe inévitable conséquence. But 
If a man does an act which is attended necessarily with an inévitable conse- 



ALL V. ALL 131 

quence, he inMst be talc en in law to hâve foreseen tliat conséquence, and, In 
point of fact, to hâve deliberately intended that it should be the resuit of his 
action. Hère you hâve thèse bankers violating that raie of poUcy, and that 
rule of justice and morality, by using tliese forged bills to ex tort from the 
father a security which he was not liable for, they giving up the bills, and 
thereby violating their duty, and placing the parties in a situation in whicli 
the de'mands of public justice could not by any possibility be complied with. 
My Liords, I regard this as a transaction which must necessarlly, for pur- 
poses of public utility, be stamped with invalldity, because it is one which 
undoubtedly, in the first place, is a departure frora what ouglit to be the 
principles of fair dealing between man and man, and it is also one which, 
if such transactions existed to any considérable extent, would be found pro- 
ductive of great injury and miscbicf to the community. I tliinlv, therefore, 
that the decree which has been made in this case is a pert'ectly correct decree." 

The principles of the décision in Williams v. Bayley were recognized 
and foUowed by the United States Circuit Court of Appeals for the 
Second Circuit, December 15, 1908, in the case of In re Lawrence, 166 
Fed. 239, 92 C. C. A. 251, where it was held that, if it could be infer- 
red from the circumstances of the case that there was an implied agree- 
ment not to prosecute, notes and securities given even in part for such 
considérations are void. The rule apparently deducible from the cases 
is that, where the créditer is paid or secured for his debt, or a part of 
it, being passive in the matter, and innocent of any représentations to 
information or motives actuating the party making the payment or giv- 
ing the security — in other words, receives the payment or security as 
made or given in due course by the debtor himself — the transaction is 
not, even as against the parties, necessarily void for illegality, although 
the undisclosed and unknown motive actuating the person enabling 
the debtor to make the payment or give the security was to shield the 
debtor from criminal prosecution. The distinction being between finan- 
cial assistance rendered, on the one hand, by one from a feeling of 
affection or friendship, to save the party guilty from the exposure and 
shame of a criminal prosecution, but rendered without the knowledge 
and connivance of the créditer, and such assistance rendered, on the 
other hand, where the creditor has reasonable cause to know and be- 
lieve it is procured for the purpose of stifling or preventing a criminal 
prosecution. 

In the présent case it is found as a conclusion of fact that the Na- 
tional Bank of Savannah, through its officers, under the circumstances 
of the case, was reasonably charged with the knowledge that the mo- 
tive actuating the complainant in making the deed of conveyance to 
her son Harry W. AU was to save her son John E- AU from criminal 
prosecution, and it is further found as a conclusion of law that that 
deed of conveyance is, as against the défendants Harry W. AU and 
the National Bank of Savannah, nuU and void. 

[7] The next question is as to what relief should be granted. In a 
large class of cases it is held that in cases of an illégal considération or 
executed contracts iUegal therefrom the court will leave the parties as 
it iînds them. Where the contract is executory, it will relieve against 
it, but, where it is executed, it will leave the parties as it finds them. 
In other words, it wiU neither relieve one party by canceling the deed 
of conveyance, nor relieve the other party by putting him in possession 



132 250 FEDERAL REPORTER 

o£ the property conveyed. This seems an unsatisfactory and illogical 
resuit in the présent case, as, taking the contract as executed by the 
deed to Harry W. Ail, it leaves the matter open to another lawsuit. 
Mrs. Ail, being in possession of the property (if she is), vvould main- 
tain her possession, and the bank would be put to its civil action to 
recover possession, and in the case, upon the production of this decree, 
the court in whose jurisdiction the action to recover may be brought 
would leave the parties as it finds them. The better rule would be to 
follow the action of the court in Williams v. Bayley, where the contract 
was canceled and the securities directed to be returned. Where, in 
the case of an executed contract, the rights of innocent third parties 
without notice had intervened, their rights would be protected by the 
court; but such is not the présent case. The property is still held 
by the National Bank of Savannah. 

It is accordingly ordered, adjudged, and decreed that the deed of 
conveyance from T. Gertrude Ail to Harry W. Ail of the premises 

described in the bill of complaint herein, bearing date the day 

of August, 1910, and recorded in the office of the rçgistrar of mesne 
conveyances for Barnwell county, Book 8D, page 238, as between the 
parties to thèse proceedings, is null and void, as being made for an il- 
légal considération, and that the défendant the National Bank of Sa- 
vannah, by virtue of such deed and of the mortgage from Harry W. 
Ail of the property therein described made to the said National Bank 
of Savannah, and of the foreclosure sale by virtue of the foreclosure 
proceedings in this court for foreclosure of such mortgage, and the 
deed of conveyance from the master of this court thereof to the said 
National Bank of Savannah made in pursuance of the decree in said 
foreclosure proceedings, takes no interest whatsoever in the lands and 
premises described therein as against the plaintifï T. Gertrude Ail, 
who as against the National Bank of Savannah is entitled to the title 
to and the possession of said premises. 

It is further ordered, adjudged, and decreed that within 30 days from 
the date of this decree the National Bank of Savannah do deliver to 
and file with the clerk of this court the said deed of conveyance from T. 
Gertrude Ail to Harry W. AU, and the said mortgage from Harry 
W. Ail to the National Bank of Savannah, and the said deed of con- 
veyance from the master of this court to the said National Bank of 
Savannah, and upon the delivery of the same to the clerk of this court 
that the clerk of this court shall exécute in proper f orm a mémorandum 
on each of them that the same has been canceled under and by virtue 
of this decree, and hâve his déclaration therein to that effect duly pro- 
bated in form to be recorded according to the laws of this state, and 
that, upon payment of the costs of thèse proceedings and the costs of 
probating, remitting, and recording the same, he do hâve the record of 
such statements of cancellation as so probated recorded in the office 
of the registrar of mesne conveyances for Barnwell county. 

On considération of ail the circumstances of this case, however, it 
is further ordered, adjudged, and decreed that the complainant, under 
the circumstances of this case, should pay ail the costs of thèse pro- 



ALL V. ALL 133 

ceedings, and that judgment for the same may be entered against her 
upon default in payment thereof . 

On Pétition for Rehearing. 

Jas. A. Willis, of Barnwell, S. C, John W. Vincent, of Hampton, 
S. C, and Bâtes & Simms, of Barnwell, S. C, for plaintiff. 

McCuUough, Martin & Blythe, of Greenville, S. C, and Garrard & 
Gazan and E. S. EUiott, ail of Savsinnah, Ga., for défendants. 

This matter came on to be heard upon a pétition for a rehearing, 
for the purpose of procuring a rescission or modification of the decree 
of this court filed herein on the 30th day of March, 1918. Due notice 
of the application has been given, and counsel on both sides hâve 
appeared and been heard. 

[8] So far as the application is based upon the grounds set up in 
the pétition, that the decree rendered in the case was not supported 
by the testimony, or is decidedly and strongly against the weight of 
the testimony, the court sees no reason to grant the rehearing. The 
first decree was made after a fuU and careful considération of ail 
the testimony, and in the opinion of the court there is no reason to 
change its conclusions of fact arrived at, based upon the testimony in 
the cause. The testimony in the case of the National Bank of Savan- 
nah against Harry W. AU, for the foreclosure of the mortgage given 
by Harry W. Ail to the National Bank of Savannah, referred to and 
relied upon in the application for a rehearing, is not testimony in this 
case. The complainant, T. Gertrude Ail, was not a party to those 
proceedings. She did not hâve the opportunity to cross-examine any 
witnesses produced, and the évidence of the witnesses in that case is 
not évidence against her. The introduction in évidence of a judgment 
roll, as in the présent case, as against a person not a party to the pro- 
ceeding, is effective to establish the fact that such a judgment has been 
recovered. It is not effective to put in évidence the testimony in that 
cause. If it could be so eiïective, the resuit would be that a third party, 
not a party to the cause, might bave the issues against him tried upon 
testimony given by witnesses whom he had never seen or had the op- 
portunity of cross-examining. The statement of the proposition in 
itself is its réfutation. 

[9] Furthermore, the decree in the foreclosure case referred to was 
in effect a consent decree, and is a carefuUy guarded one. No judi- 
cial conclusions either of fact or law were found by the court. The 
decree, therefore, was practically nothing more than a contractual 
matter between the National Bank of Savannah and Harry W. Ail, 
whereby Mrs. T. Gertrude Ail was in no wise bound. 

[10] Another point was raised at this hearing, however, which in- 
volves more considération, viz., that the court erred in this matter 
because the contract between the parties had been executed, and, both 
parties being in pari delicto, the court would leave them as it found 
them. The question, in the first instance, is whether or not the con- 
tract in question was really an executed contract. There are a num- 
ber of cases with some refinement of définition as to what are executed 



134 250 FEDERAL REPORTER 

and executory contracts, and some confusion also as to the meaning 
of the Word "executed." In légal parlance, the word "executed," 
referring to a contract, means that the contract or instrument itself 
was signed, sealed, or in some way formally agreed to as its proper 
exécution. When referring, however, to executed and executory con- 
tracts, the word "executed" does not mean executed with regard to 
the instrument expressing the contract, but executed in the sensé of 
performance— that the contract has been actually performed by both 
sides. An executed contract, it follows, is a contract which has been 
so entirely performed by both parties that nothing remains to be donc 
by either; that is, where a contract is a contract which is executed 
as a whole. Some contracts may be executed as to one party, and exec- 
utory as to the other. Very f ew contracts are therefore in this sensé 
executed contracts, except where the entire act or acts, of whatever 
nature, contemplated to be performed by either party to the contract, 
hâve been performed. A bond under seal, although it may covenant 
to pay a sum of money at a future date, is not in this sensé an executed 
contract, as there is an act to be done by the obligor, to wit, the pay- 
ment of the money. Nor is a deed of conveyance, solemn in form 
as it may be, an executed contract in this sensé in itself — that is to 
say, in the sensé of entire performance — because a deed of convey- 
ance is only the évidence of the transfer of title and the right to pos- 
session. To exécute it, in the sensé of performance, there must be 
a delivery both of the deed and the land. The actual possession of 
the land must be delivered by the grantor to the grantee before the 
transfer is so executed. 

In the case of Fletcher v. Peck, 6 Cranch, 87, 3 h. Ed. 162, the 
Suprême Court of the United States held that a grant from a state 
was an executed contract, and was equally within the prohibition of the 
constitutional provision forbidding the performance of the contract 
as an executory contract; but in giving that définition the Suprême 
Court was dealing with the question whethcr or not the constitutional 
inhibition appHed only to executory contracts, and not executed con- 
tracts, and held that the prohibition applied equally to contracts which 
were claimed to be executed, such as a grant, as well as contracts which 
were still executory. In Farrington v. Tennessee, 95 U. S. 679, 24 
ly. Ed. 558, the court says: 

"Coi^tracts are executed or executory. A contract Is executed, wlaere every- 
thiiig that was to be done is done, and nothing remains to be done. A grant 
actuaily made is witliln this eategory. Such a contract requires no considéra- 
tion (o i*iii>port it. * * * Tlie constitutional ijrohibition api>lies alike to 
both executory aud executed contracts, by wliomsoever mude." 

The point of nonperf ormancè, as taking from the contract the char- . 
acter of an executed one, was not claimed or discussed. A définition, 
and one the most frequently repeated, is that given in McDonald v. 
Hewett, 15 Johns. (N. Y.) 349, 8 Am. Dec. 241, where it is stated 
that an executory contract conveys a chose in action ; an executed con- 
tract, a chose in possession. The témi "chose in possession," however, 
is a little ambiguous, in the word "chose," because it may convey realty, 
and therefore it would be better to say an executed contract conveys 



ALL V. ALL 135 

res, or property, into possession. The définition given in 1 Bouvier's 
L,aw Dictionary, 356, is that a contract becomes an executed one when 
nothing remains to be done hy either party, and. where the transaction 
has been completed, or was completed at the time the contract was 
made. A deed of bargain and sale of personal property, therefore, is 
not necessarily executed — that is, not performed — at the time that the 
contract is signed and sealed. It becomes executed only when the 
grantor has transferred the actual physical possession to the grantee. 
The same is the case with a deed of conveyance of real estate under 
the common-law method of feoffment, where delivery of possession 
by turf and twig was necessary. There was a written deed of feoff- 
ment or sale; then the parties actually went upon the land, and a 
formai delivery of possession by turf and twig was made by the grantor, 
a certificate of which delivery was appended by the witnesses to the 
deed. Until, however, this actual delivery of possession by turf and 
twig was performed, the contract was not performed or executed. So, 
when the method of conveyance by lease and release was adopted, the 
form of a lease was first used to put the party in possession, and, the 
party so being in physical possession of the land under the lease, the 
release was executed under the statute for transferring uses into pos- 
session, in the terms of an indenture, or release, conveyance, and sale, 
which transferred the title, so the transfer of title and the transfer of 
actual possession both concurred. 

Applying thèse principles to the présent case, it is évident that the 
contract was not an executed one by performance, inasmuch as no 
actual possession transferring the laaid in question to the National 
Bank of Savannah has ever been made. The évidence is that Mrs. 
T. Gertrude Ail, the complainant, has never parted with the possession 
of the property ; not when she made the deed of conveyance to her 
son Harry W. AU, nor did the latter deliver possession to the National 
Bank of Savannah. That this is the case appears from the pétition 
for a writ of assistance, which was filed by the National Bank of 
Savannah in the case of National Bank of Savannah v. Harry W. Ail, 
in the foreclosure proceedings hefore alluded to, filed on the 22d of 
December, 1917, whereby the National Bank of Savannah prayed for a 
writ of assistance, directing the marshal of the district to put the Na- 
tional Bank of Savannah in possession of the land, demand for pos- 
session of which had been made upon Harry W. Ail, and which, from 
the afiîdavits submitted with the pétition for the writ, it appears Ail 
refused to deliver, stating that he had never been in possession of the 
land. The record in the foreclosure case, therefore, upon the appli- 
cation of the National Bank of Savannah itself, shows that the Na- 
tional Bank of Savannah has never been in possession of the property, 
and the deed of conveyance to Harry W. AU by the complainant, T. 
Gertrude Ail, and by the master of this court in the foreclosure case, 
acting under the contractual decree for sale, to the National Bank of 
Savannah, hâve never been executed or performed by any delivery of 
possession. 

It was argued that the mère exécution of a deed is a complète exé- 
cution or performance of the contract, because in an action of eject- 



136 250 FEDERAL RBPORTEK 

ment, or for recovery of possession of real estate, the production of 
a deed is sufficient évidence of the right to possession. Even were 
this true as against the parties to that deed, or against parties to the 
foreclosure proceedings, it would not be true as against outside parties, 
such as the complainant, T. Gertrude Ail, in this case. Furthermore, 
in an action for ejectment, the production of the deed transferring the 
title would appear to be only presumptive of the performance by the 
delivery of the possession. It would still be compétent for the con- 
testant to prove, either that the deed itself had not been fully executed, 
in that the deed itself had not been delivered, or that the contract had 
never been fully executed, in that possession of the land had never 
been delivered, for whatever that might be worth, as against any execu- 
tory right of possession created by the delivery of the deed. It would 
not appear, therefore, that there is any such executed contract in this 
case, as would be necessary to lead the court to apply the doctrine that, 
where both parties are in pari delicto in the case of an invalid contract 
of holding, the National Bank of Savannah is entitled to the posses- 
sion of the property. 

Apart f rom this, it would not appear that that principle of law should 
apply in a case such as this, where the deed is declared invalid, upon 
the grounds of public policy. It may well be that the complainant, T. 
Gertrude Ail, does not appear in a very admirable position. She was, 
in the opinion of the court, beyond doubt stimulated in her action by 
her désire to protect her son f rom criminal prosecution and punishment. 
She acted under the pressure of her maternai feelings for the safe- 
guarding of her offspring. AU that has been accomplished. The period 
within which her son could be prosecuted criminally under the stat- 
utes of Georgia has expired, and ail criminal prosecution against him 
is now barred. Whilst the élément of criminal prosecution is not a 
right which belonged to the National Bank of Savannah, which it 
could rely upon as thereby losing something which has prejudiced it 
in its position in this suit, yet the fact still is that, the immunity from 
proçecution having been secured, the resuit is that Mrs. Gertrude Ail 
is now attempting to set aside and treat as nought the promises under 
which, according to her own statement, that immunity was procured. 

That, however, is not thé question. The contract is not set aside 
hecause of any légal or équitable rights belonging to Mrs. T. Gertrude 
Ail, the complainant. It is set aside on the grounds of public policy, 
in view of the potentiality for great evil that would resuit from allow- 
ing such contracts to be upheld. The theory of the law is that such 
a strong lever as parental — especially maternai — aiïection shall not be 
used to compel persons affected to strip themselves for the benefit of 
a criminal and unworthy son or relation. Nor shall it be so that, 
where a person has committed a crime, those who should be the pros- 
ecuting witnesses to bring him to justice shall be stimulated to non- 
action or induced to stifle prosecution for any financial gain. Where 
a person injured may not set the criminal machinery of the law in 
action out of humanity or tender considération for a weak or youthf ul 
criminal, it may be one thing ; but where the machinery of the law and 
the administration of public justice is not set in action by those who 



WALSH CONST. CO. V. CITY OF CLEVELAND 137 

should do so because of some financial benefit to inure to the party who 
should be the prosecuting witness, it is another thing ; and it is not the 
resuh which the law desires to allow consummated. The contract in 
this case is declared invahd on grounds of the highest public pohcy. 
Por ail thèse reasons, the opinion of the court is that its conclusions 
in the former decree should not be disturbed, and the application for 
a rehearing is therefore refused. 



WALSH CONST. CO. v. CITY OF OLKA'ELAND et al. 

(District Court, N. D. Ohio, B. D. April 4, 1918.) 

No. &40(i. 

1. Peincipal and Surety i©=5l52 — Construction Oontracts— Bond — Joint 

Obligors. 

Where notice to bldders required a performance bond, and the written 
agreement made the bond and notice a part of the contract, the con- 
tractor and surety became jolntly and severally liable for performance 
of ail conditions in the contract, though the surety's liability was limited 
to the penalty in the bond, so both at cominon law and under (ien. Code 
Ohlo, §:§ 112,'5è, 11258, a joint or separate action misbt be brought against 
the contractor and surety in case of a breach of the contract. 

2. Judgment <g=241 — Joint Parties — Separate Judgments. 

Where a contract and bond for performance made the contractor and 
surety joint obligors, under Gen. Code Ohio, §§ ll.y83, 11584, separate 
judgments may be rendered against the several défendants ; the judg- 
ment against the surety being limited to the amount for which it might 
be obligated. 

3. Courts (@=>36.3 — ITederal Courts — Conformitï to State Law. 

In an action in the Fédéral District Court for Ohio, the question 
whethor a claim is avallable aa a counterclaim is controUed by the state 
laws. 

4. Set-Off and Counterclaim ©=>29(1) — Subject-Matter or "Counter- 

claim." 

Under Gen. Code Ohlo, § 11317, defining a "counterclaim" as a cause of 
action existing in favor of a défendant against a plaintiff or another de- 
fendant, or both, between whom a several judgment mlght be had in the 
action, and arising out of the contract or transaction set forth in the 
pétition as the foundation of plalntiff's claim, a munlclpallty, sued for 
a balance allcged to be due on a construction contract, having made the 
surety on the contractor's performance bond a party défendant, may 
-' counterclaim against the contractor and surety for damages for the con- 
tractor's delay iu completing the work and failure to complète it accord- 
ing to spécifications. 

[Ed. Note. — For other définitions, see Words and Phrases, First and 
Second Séries, Counterclaim.] 

At Law. Action by the Walsh Construction Company against the 
City of Cleveland, which applied for an order making the National 
Surety Company a défendant, and filed a cross-petition against plain- 
tifï and the National Surety Company. On demurrer of the National 
Surety Company to the cross-petition. Demurrer overruled. 

(gssFor other cases see same topic & KBY-NUMBER in ail Key-Numbered Dlgests & Indexes 



138 250 FEDERAL RBPORTlîK 

Klein &: Harris, of Cleveland, Ohio, for plaintiff. 
Alfred Çlum, of Cleveland, Ohio, for défendant city of Cleveland. 
Toiles, Hogsett, Ginn & Morley, of Cleveland, Ohio, for défendant 
National Surety Ce. 

WESTENHAVER, District Judge. The plaintiff, Walsh Con- 
struction Company, filed its pétition in this court against the original 
défendant, the city of Cleveland, an Ohio municipal corporation, seek- 
ing to recover a balance alleged to be due on a certain construction 
contract for the érection of a filtration plant. A copy of this contract 
is annexed to and made a part of the pétition. Thereafter the city of 
Cleveland applied for and obtained an order making the National Sure- 
ty Company also a défendant, and thereupon filed its answer to the 
original pétition, and also its cross-petition herein against the plaintiff 
and the National Surety Company. To this cross-petition the Nation- 
al Surety Company has filed its demurrer, assigning in support there- 
of three grounds: (1) Misjoinder of parties défendant; (2) misjoin- 
der of causes of action; (3) several causes of action against several 
défendants are improperly joined. 

The construction contract, annexed to plaintiff's pétition and also 
to this cross-petition, consists of several documents, namely, a notice 
to bidders, a proposai submitted pursuant thereto by the Walsh Con- 
struction Company, a formai agreement in writing, signed by the 
Walsh Construction Company and the city of Cleveland, plans and 
spécifications for the proposed work, and a performance bond execut- 
ed by the Walsh Construction Company and the National Surety Com- 
pany. The notice to bidders provides that a bond in a penalty equal 
to 50 per cent, of the amount of the proposed contract, with an ap- 
proved surety company as surety, will be required from the accepted 
bidder for the faithful performance of the contract. The written 
agreement provides that the notice to bidders, the proposai for bids, 
the bid, the bond, and contract drawings shall ail be taken as parts 
of that agreement. 

The bond thus made a part of this contract binds the Walsh Con- 
struction Company and the National Surety Company to the obligée, 
the city of Cleveland, in the sum of v$136,.500, both jointly and several- 
ly. It recites the making of the construction contract, a copy of which, 
including notice to bidders, proposais, bid, and spécifications, is at- 
tached thereto and made a part tliereof as fully as if the same wefe 
set f orth therein. The condition of the bond is that, if the Walsh Con- 
struction Company shall well and truly exécute ail and singular the 
stipulations by it to be executed, contained in said written agreement, 
and shall fully and faithfuUy perform the work therein specified, and 
ail and singular the terms, conditions, and requirements of the plans. 
Spécifications, and contract, the obligation is to be void; otherwise to 
be and remain in fuU force and virtue in law. 

Plaintiff's pétition is framed on the theory that ail the terms, con- 
ditions, and requirements of said construction contract hâve been exe- 
cuted and performed by it, that ail the work therein specified has been 
fully and faithfully performed, and that ail the conditions, stipulations, 



WALSH CONST. CO. V. CITY OF CLEVELAND 139 

and obligations of the plans, spécifications, and cdntract hâve been also 
fuUy and faithfully kept and performed. Judgnient is prayed for the 
balance alleged to be due as if said contract were fully performed in ail 
its terms, conditions, and requirements. 

Defendant's cross-petition proceeds on the theory that the Walsh 
Construction Company has not kept and performed the terms, condi- 
tions, and requirements of said written agreement, but that, on the con- 
trary, it has failed so to do. The cross-petition sets up the city's de- 
mand in three causes of action: (1) For the recovery of liquidated 
damages for delay in completing the work; (2) for the recovery of 
damages due to an alleged failure to complète and construct the filtra- 
tion plant as provided by said agreement; and (3) a cause of action 
which incorporâtes therein the allégations of the first and second caus- 
es of action and prays judgment against the Walsh Construction Com- 
pany and the National Surety Company for the full penalty of said 
bond on account of the alleged defaults set up in said first and sec- 
ond causes of action. Judgment is prayed against the Walsh Construc- 
tion Company alone for $328,000, and against the Walsh Construction 
Company and the National Surety Company for the full penalty of the 
bond. 

[1] The* argument in support of the demurrer is, in brief, that the 
first and second causes of action are against the Walsh Construction 
Company alone, and are based upon the construction contract in writ- 
ing; that the third cause of action is against the Walsh Construction 
Company and the National Surety Company on the performance bond ; 
and that thèse first two causes of action are on a contract separate 
and independent from the contract set up in the third. The misjoin- 
der of parties and causes of action, it is argued, results from the fact 
that the first and second causes of action are on a contract separate 
from that set up in the third, and that, inasmuch as the parties to thèse 
two contracts are différent and the causes of action thus joined do 
not afïect ail of the défendants equally, the joinder is improper. 

The fundamental assumption of this argument is that the construc- 
tion contract and the performance bonds are separate and independ- 
ent contracts. This assumption cannot be admitted. On the contra- 
ry, thèse several documents are expressly made a part of the same 
contract. They were ail executed at the same time, upon the same con- 
sidération, and for the same purpose, and took efïect by a single de- 
livery. As a resuit there is in law but one contract. A simple test of 
the question presented is whether or not an original action against the 
Walsh Construction Company and its surety could be maintained on 
the third cause of action set up in the cross-petition. Such an ac- 
tion, on well-settled légal principles, could undoubtedly be maintained 
without first compelling the obligée to sue the principal on the contract 
and exhaust his remédies against him. Both défendants hâve agreed 
jointly and severally to perform ail the terms of the construction con- 
tract. They are in law joint and several contractors and obligors. 
The surety's obligation is not that of an indemnitor, or of a collatéral 
guarantor, against whom no action can be brought without demand or 
notice, or until after failure to collect from the principal; the obliga- 



140 250 FEDERAL REPORTER 

tion is an absolute and unconditional one, binding both principal and 
surety for the full performance of each and every term, condition, and 
requirement of the contract. A joint or a separate action might at 
commun law and under sections 11256 and 11258, General Code of 
Ohio, be brought thereon. Stage v. Olds, 12 Ohio, 159; Neil v. Board 
of Trustées, 31 Ohio St. 15; Saint v. Wheeler & Wilson Mfg. Co., 95 
Ala. 362, 10 South. 539, 36 Am. St. Rep. 210. 

Counsel's misapprehension of the nature of this cross-petition is 
doubtless due to the inartificial manner in which the city's demands are 
stated. The cross-petition allèges that the damage sustained by the 
city of Cleveland by reason of the Walsh Construction Company's de- 
fault is the sum of $328,000, for which sum it asks judgment, whereas 
the National Surety Company's obligation is limited to $136,500, with 
interest from the date of filing the cross-petition, which sum is the 
maximum recovery permissible against it. This confusion is probably 
increased by the f act that the cross-petitioner's demands are stated as 
three separate causes of action. The third cause of action, however, 
by référence incorporâtes therein the allégations of the first and sec- 
ond, which State fuUy and in détail the defaults of the principal for 
which the surety has bound itself . For the purposes of this demurrer 
such defects of form will be disregarded, and the incorporation by réf- 
érence of thé allégations of the first and second causes in the third 
cause is sufficient to state a good cause of action jointly and severally 
upon their joint and several obligations to perform fuUy ail the terms, 
conditions, and requirements of the construction contract. This exact 
question seems to hâve arisen and was decided the same way under a 
code System substantially like that of Ohio in Houston v. Delahay, 
14 Kan. 125, the opinion being delivered by Judge Brewer, afterwards 
Mr. Justice Brewer of the United States Suprême Court. 

[2] The cross-petitioner, it is true, demands against the principal 
full damages in an amount in excess of the penalty of the bond and of 
the amount for which judgment may be rendered against the surety. 
This is permissible, since both défendants hâve bound themselves joint- 
ly and severally by the same obligation, notwithstanding the surety has 
limited the amount for which it is bound to the penalty of the bond, 
and that the principal has bound itself to that extent and also without 
limit. This situation is the familiar one of a joint and several bond 
executed by two or more sureties, whereby the principal's obligation is 
for the full penalty and the sureties' obligations are limited to separate 
parts thereof . It is settled law that a single action against the principal 
and ail the sureties may be maintained on such an obligation, and that 
separate judgments may be rendered against the several défendants 
properly limited to the amount for which each surety may hâve sepa- 
rately bound himself. 31 Cyc. 141 ; 9 C. J. 127, § 238; People v. Ed- 
wards, 9 Cal. 286; People v. Love, 25 Cal. 520; Heppe v. Johnson, 73 
Cal. 265, 14 Pac. 833; Groeers' Bank v. Kingman, 16 Gray (Mass.) 
473 ; Briggs v. McDoniald, 166 Mass. 37, 43 N. E. 1003. The ancient 
common-law requirement that a joint judgment for a single amount 
must be rendered in a joint action against several défendants has long 
since been changed by statutes authorizing separate and several judg- 



WALSH CONST. CO. V. CITY OF CLEVELAND 141 

ments; and such is now the law of Ohio', General Code, §§ 11583 and 
11584. 

[3, 4] Such being the essential nature o£ the case made by the cross- 
petition, the only remaining question is whether or not the subject-mat- 
ter thereof is available as a counterclaim. This question is controlled 
by the Ohio Code of Civil Procédure, and a claim available according 
to that Code as a counterclaim may be set up and enforced in an action 
in this court. West v. Aurora City, 6 Wall. 139, 18 L. Ed. 819; Par- 
tridge V. Insurance Co., 15 Wall. 573, 21 L. Ed. 229. Section 11317, 
General Code of Ohio, defines a counterclaim as : 

"A cause of action exlsting in favor of a défendant agalnst a plaintiff or 
anotlier défendant, or both, between whom a several jiidgment might be had 
in the action, and arising out of the contract or transaction set forth in the 
pétition as the foundation of tlie plaintlff's claim, or connected with the 
subject of the action." 

The cause of action hère is against the plaintiff and the National 
Surety Company jointly and severally and is consequently a cause of 
action against each one and both of them. It arises out of the contract 
set forth in the pétition as the foundation of the plaintiff's claim. It 
is a cause of action existing in favor of the original défendant against 
the plaintiff and another défendant. It is a cause of action upon which 
a several judgment might be had in favor of the original défendant 
against the original plaintiff, or the National Surety Company, or both 
of them. It answers, therefore, ail the requirements of a counterclaim 
as defined by the section above cited. The National Surety Company, 
it is true, was not made a défendant to the original pétition ; but this 
situation is specially provided for by section 11318, General Code of 
Ohio, which provides that when it appears that a new party is needed 
to a final décision on a counterclaim, the court may permit such a party 
to be made by a summons to answer the counterclaim. This procédure 
has been had. 

Counsel cite in support of this demurrer and rely on the following 
cases : Eee v. Insurance Co., 12 Ohio Dec. Rep. 109 ; Seibert v. Insur- 
ance Co., 12 Ohio N. P. (N. S.) 210; Heinrichsdorf v. Keppler, 3 Ohio 
Law Rep. 476; Jones v. Wright, 1 Ohio Cir. Ct. R. (N. S,) 59; Su- 
perior Mantel Co. v. Underwriters Mutual Pire Insurance Co., 17 Ohio 
Dec. N. P. 118. An examination of them shows that the causes of ac- 
tion joined therein were on separate and independent con tracts made 
and entered into by separate défendants and at différent times. Mani- 
festly there was a misjoinder of parties and of causes of action in those 
cases. They contain nothing in conflict with the conclusions herein 
announced. 

Counsel also cite a judgment, without opinion, made in W. J. Gawne 
V. City of Cleveland, Case No. 91927, Court of Common Pleas, Cuya- 
hoga County, sustaining a demurrer to a cross-petition against a surety 
and principal in a performance bond under conditions exactly like 
those hère présent. My recollection of that holding is as claimed by 
counsel; but, notwithstanding my respect for the learned judge who 
made it, I am persuaded that it was erroneous. Some ten years' time 
Avas taken in prosecuting that case to final judgment, after which the 



142 250 FEDERAL EEPORTEB 

city was forcedto bring a new action against the surety, wliich, I am 
informed, has not, after two years, yet been brought to trial. Such 
a procédure is a reflection on our System of jurisprudence. No con- 
ceivable reason exists why the entire controversy should not be heard 
and determined once and for ail in one proceeding, and, in my opinion, 
proper practice and pleading permit, if they do not require, that it 
should be donc. 

The demurrer of the National Surety Company will be overruled. 
An exception may be noted. 



DOOI.ET V. PENNSÏLVANIA K. CO. (CHICAGO, ST. P., M. & O. EY. GO. 

et al., Garnlsheès). 

(District Court, D. Minnesota, Fourth Division. May 10, 1918.) 

t. Stattjtes <S=9l85 — Wab ®=9l0(2) — Takinq of Raileoads fob War Pub- 
poses. 

Under Act Aug. 29, 1916, c. 418, S 1, 39 Stat. 645, provldlng that the 
Président in time of war is empowered, through the Secretary of War, 
to talce possession and assume control of any system or Systems of trans- 
portatlon, and to utilize the same to the exclusion, as far as may be 
necessary, of ail other traffic, for the transfer and transportation of 
troops, etc., or for such other purposes connected wlth the emergency as 
may be needful and désirable, the clause of the President's proclamation 
relative to governmental control of railroads, dated December 26, 1917, 
declaring that, except wîth the prior written assent of the Dlrector Gen- 
eral, no attachment by mesne process or on exécution shall be levied 
against the property used by any of said transportation Systems in the 
couduct of their business as common carriers, was warranted, for what 
Is implied In a statute is as much a part of It as what Is expressed, and, 
when a power is conferred, everything necessary to carry it out and 
make it effectuai will be Implied, and It is obvions that governmental 
control of railroads, to be effective, should be exclusive, and not subject 
to interférence by private parties. 

2. Wab <®=10(2)— Taking of Eaileoads fob Wab Pueposes — Pbesident's 

Pbqolamation. 

Moneys constltutlng traffic balances fall wlthln the clause of the Presi- 
dent's proclamation of December 26, 1917, relative to governmental control 
of railroads, declaring that, except wlth the prior written assent of the 
Dlrector General, no attachment by mesne process or on exécution shall 
be levied on or against any of the property used by any of sald transporta- 
tion Systems in the conduct of their business as common carriers, and 
cannot be garnished, for such funds constltute a revolving fund, appli- 
cable to payment of necessary expenses in rallroadlng, which is as essen- 
tlal as cars, engines, or coal. 

3. Evidence iS=>20(2) — Judicial Notice — Railboads. 

The court will take judlclal notice that no railroad System can be suc- 
cessfully operated wlthout a revolving fund, avallable for the payment 
of wages and for other necessaiy expenses In rallroadlng. 

At Law. Action by Avis Dooley against the Pennsylvania Railroad 
Company, in which the Chicago, St. Paul, Minneapolis & Omaha Rail- 
way Company and others were summoned as garnishees. On motion 

^:=>For other cases see same toplc & KEY-NUMBER in ail Key-Numbered Dlgests & Indexes 



DOOLEY V. PENNSTLVANIA R. CO. Ii3 

to quash tlie garnishment proceedings and discharge the garnishees. 
Motion granted. 

Moore, Oppenheimer & Peterson, of St. Paul, Minn., for the motion. 
Wm. A. Tautges, of Minneapolis, Minn., opposed. 

BOOTH, District Judge. The main facts upon which the présent 
motion is based are not in dispute. The garnishment summons was 
served on the several garnishees on January 29, 1918. Notice was 
thereafter given to the défendant company as required by statute. Dis- 
closures were had, showing that several of the garnishees had, on the 
date of the service of the garnishee summons, certain traffic balances 
in their hands belonging to the défendant Pennsylvania Company. It 
is admitted that the défendant company and the several garnishee com- 
panies had ail been taken under fédéral control prior to the garnish- 
ments. 

The ground relied upon at the argument of the motion to quash was 
that, by virtue of the provision in the proclamation of the Président of 
the United States, dated December 26, 1917, the traffic balances afore- 
said were not garnishable. The provision in said proclamation refer- 
red to is as follows : 

"Except with the prior written assent of said director, no attaehment by 
mesne process or on exécution shall be levied on or against any of tlie prop- 
erty nsed by any of said transportation Systems in tlie conduct of their 
business as common carriers ; but siiits may be brought by and against said 
carriers and judgments entered as hitliorto until and except so far as said 
director may by gênerai or spécial order, otherwise détermine." 

It is admitted that no' written consent of the director mentioned in 
said above-quoted clause had been obtained granting the levy of the 
garnishment. It is claimed, however, by the plaintiff, first, that this 
particular clause of the proclamation is without warrant of law ; sec- 
ond, that traffic balances are not included within the terms of said 
clause — in other words, that such traffic balances are not "property 
used by any of said transportation Systems in the conduct of their 
business as common carriers." 

[1] As to the first ground: The law pursuant to which the Presi- 
dent's proclamation was issued is found in section 1, chapter 418, 39 
Stat. page 645. It reads as follows : 

"The Président, in time of war, is empowered, throngh the Secretary of War, 
to take possession and assume control of any System or Systems of transpor- 
tation, or any imrt thereof, and to uUlize the same, to the exclusion as far as 
may be necessary of ail other tralfic thereon, for the transfer and transporta- 
tion of troops, war material and eqnipment, or for such other purposes con- 
nected with the emergency as may be needful or désirable." 

It is elementary that what is implied in a statute is as much a part 
of it as what is expressed. County of Wilson v. National Bank, 103 
U. S. 770-778, 26 L. Ed. 488 ; City of Little Rock v. U. S., 103 Fed. 
418, 420, 43 C. C. A. 261. It is also elementary that, when a power is 
conf erred by statute, everything necessary to carry out the power and 
make it effectuai and complète will be implied. 26 Am. & Eng. Ency. 
of Law (2d Ed.) p. 614, and cases cited. This is the same principle 



144 250 FEDERAL REPORTER 

that is well established in the law of agency. Mechem on Agency (2d 
Ed.) § 789. 

In the statute above quoted, the Président was authorized to "take 
possession, assume control and utiHze any System of transportation." 
It needs no argument to show that it was necessary, in order that thèse 
powers be made efifective, that the possession, the control, and the 
utihzation of the property should be exclusive, and not subject to in- 
terférence by private parties. The clause in the President's proclama- 
tion preventing levies by lien or final process was therefore fully au- 
thorized and was valid. 

[2, 3] The second contention, viz. that moneys constituting traffic 
balances do not come within the purview of the proclamation, in other 
words, are not "property used by any of said transportation Systems 
in the conduct of their business as common carriers," in my opinion 
cannot be sustained. Certainly cars, engines, coal, machinery, would 
ail be wholly within the terms used. Moneys coming in as traffic bal- 
ances are simply eamings constituting a revolving fund, and form 
part of a working or liquid capital. Such a fund is just as necessary 
to the successful opération of a railrbad as cars, engines, or coal. The 
liquid capital may be part of a wage fund to-day, part of a coal-pur- 
chasing fund to-morrow, and part of a car rental fund the day after. 
The court will take judicial notice that no- railroad System can be suc- 
cessfully operated without such a fund. The tying up of such a fund 
would clearly be detrimental to the successful opération of a railroad 
System, in the same way that the seizure of any other of its property 
would be. 

I am clearly of the opinion that thèse traffic balances involved in the 
présent matter are within the scope of the language of the President's 
proclamation, and are therefore not subject to garnishment. 

Motion sustained. 



IN KE BISHOP'S ESTATE 145 

In re BISHOP'S ESTATE. 

KING V. SMITH et al. 

(Circuit Court of Appeals, Nlnth Circuit. March 7, 1918.) 

No. 3000. 

1. OOUETS i^^'IS — JUIilSDICTION. 

An individuel cannot confer, upon a court not othervvlse possessing such 
powers, jurisdiction as it pertalns to any partieular matter, and the 
incumbents of the court cannot act as to such matters as a court. 

2. WiLLs iS='692 — CoRSTRUCTiON— Power to Appoi.nt Trustées. 

Prior to 1S92 the Suprême Court of Hawaii, as a court, possessed no 
original equity jurisdiction, but for several years previously such jurisdic- 
tion was vested in the justices of such court and in the judges of the 
circuit court, as chancellors, sitting at chambers, several ly, and not joint- 
ly, and from their décisions so made an appeal niight be taken to the 
Suprême Court in banco. During such tinie a charitable trust was created, 
by a will whieh named the first trustées and provided that the number 
should be Icept the same and that vacancies should be filled "by the 
choice of a majority of the justices of the Suprême Court." Held, that 
sucli power of appointment was conferred upon the justices as indlviduals, 
and not in their officiai capacity ; the désignation of their office being 
merely descriptio person*. Held, further, that such ]iower of appoint- 
ment, when exercised, was final, and could not be reviewed. 

3. JuDGES <S=547(1) — Disqualification to Act — Bias and Préjudice. 

The fact that such justices, as indlviduals, made an appointment to fill 
a vacancy, did not dlsqualify them, sitting as a court, from entertaining 
an appeal from the circuit court in a suit involving tlie validity of sucli 
appointment. 

Appeal from the Suprême Court of the Territory of Hawaii. 

Pétition in equity by William O. Smith, E. Faxon Bishop, Albert F. 
Judd, and Alfred W. Carter, as trustées under the will of Bernice P. 
Bishop, deceased, for confirmation of the appointment of William Wil- 
liamson as a cotrustee. A decree holding such appointment invalid, and 
appointing Charles E. King trustée, was reversed by the Suprême Court 
of Hawaii, and King appeals. Affirmed. 

This case cornes hère on appeal from the Suprême Court of the territory of 
Hawaii. It has to do with the construction of the tast will and testament of 
one Bernice l'auahi Bishop respecting the appointment of trustées for the 
administration of a trust establlshed for the érection and maintenance of 
schools, preferably for Hawaiian boys and girls, of pure or inixed lilood, to 
be linown as the "Kamehameha Schools." I^arge discrétion is left to the 
trustées in the exécution of the trust in furtherance of Its objects. The will 
bears date October 31, 1883, and was probated December 2, 1884. The testa- 
trix named flve persons under the will as trustées to "carry into effect the 
trusts specificd." Then follows this provl.sion: "I direct that a majority of 
my said trustées may act in ail cases, and may convey real estate, and per- 
f orm ail of the dutles and powers hereby conferred ; but three of them at 
least must join in ail acts. I further direct that the number of my said 
trustées shall be kept at five, and that vacancies shall be fllled by tlie choice 
of a majority of the justices of the Suprême Court, the sélection to be made 
from persons of the Protestant religion." 

On May 19, 1916, Sanniel M. Damon, one of the trustées, deslring to be re- 
lieved of bis duties as such, présentée! his written résignation, and on ,Tune 
9th such résignation was presented to the first judge of the First judicial 



(g=jFor other cases see same topic & KBY-NUMBER in ail Key-Numbered Dlgests & Indexes 
250 F.— 10 



146 250 FEDERAL REPOETER 

circuit, who, on the pétition of ail of the trustées, made an order aoceptlng 
the same, tlius leaving a vaeaney In the board. On the same day the vacancy 
was brought to the attention of the justices o£ the Suprême Court, and, ail 
the justices concurring, they named and appointed William Wllliamson to 
suoceed Damon nnder the provisions of the will. Thereupon the remalning 
trustées presented to the circuit judge their pétition, setting forth the qualifi- 
cations of Wllliamson and the faet of his appointment by the justices, and 
prayed a confirmation of such appointment Upon a hearing touchlng the 
fitness of Wllliamson to discharge the dutles devolvlng upon a trustée, at 
whleh évidence was adduced, the judge, on July 29, 1916, decided that the 
appointment of Williamson by the justices o£ the Suprême Court was without 
authority and vold, and made and entered an order appointing one Charles 
E. King as trustée to fiU the vacancy oceasioned by the résignation of Damon, 
and flxed his bond at $20,000, if glven separately, providing, however, that a 
new joint bond on behalf of ail of the trustées, including King, might be given 
in the sum of $100,000. On August 3, 1916, a decree was entered in aecordance 
with the décision. From the decree the trustées appealed to the Suprême 
Court, resulting in a reversai of the circuit judge, to whom the cause was re- 
manded, sitting at chambers in equity, with directions to dismiss the pétition 
asking for approval of the appointment of Williamson, and for such further 
proceedings as were consistent with the views expressed by the opinion of 
the court. From the decree thus rendered by the Suprême Court, King prose- 
<2utes an appeal to this court. 

E. C. Peters, of Honolulu, T. H., for appellant. 
Henry Holmes, Clarence H. Oison, and Patil R. Bartlett, ail of 
Honolulu, T. H., for appellees. 

Before GILBERT and HUNT, Circuit Judges, and WOLVER- 
TON, District Judge. 

WOEVERTON, District Judge. Two questions are presented hère 
for our détermination: First, whether the justices of the Suprême 
Court were disqualified to sit in the cause on its appeal from the cir- 
cuit judge; and, second, whether the désignation of the justices of the 
Suprême Court for filling vacancies in the board of trustées, under 
the will, by choice, of a majority of such justices, is a descriptio per- 
sonse merely, or a naming of such justices in their officiai capacity, or 
as a court. As the décision of the first question dépends somewhat up- 
on the disposition of the latter, we will treat of the lâtter first. 

It is not doubted that a testator may make such disposition of his 
property as he desires. He may devolve it in trust, to meet the require- 
ments of a designated purpose, and he may create a board of trus- 
tées for administering the trust ; and, if the object be charitable, he 
may devise the means, if they be lawful, for maintaining the board in 
perpetuity for accomplishing the object and purposes of the trust. In- 
glis V. Trustées of the Sailors' Snug Harbor, 3 Pet. 99, 7 L. Ed. 617; In 
re John's Will, 30 Or. 494, 47 Pac. 341, 50 Pac. 226, 36 L. R. A. 242. 

[1] The device for perpetuating the board of trustées is that the va- 
cancies shall be fiUed by the choice of a majority of the justices of the 
Suprême Court of the territory of Hawaii. As an aid in determining 
whether the testatrix intended to vest the power of appointment in 
the justices of the Suprême Court as individuals, or in them as officers 
of the court, it will be well to ascertain what were the functions of 
the court, as well as of the individual members thereof, at the time 
of the exécution of the will. If their functions were such, acting by 



IN RE BISHOP'S ESTATE 147 

a majority, as to indicate jurisdiction in equity to make such appoint- 
ments, it might be presumed that the testatrix intended that the jus- 
tices were to act officially in discharging the office imposed upon them 
by the will. But, if the justices were without power in that particu- 
lar, the inference, from the adoption of that method, would be direct- 
ly to the contrary, for an individual cannot confer upon a court, not 
otherwise possessing such powers, jurisdiction as it pertains to any 
particular matter, and the incumbents of the court cannot act as to 
such matters as a court. Léman v. Sherman et al., 117 111. 657, 6 N. E. 
872; Harwood v. Tracy, 118 Mo. 631, 24 S. W. 214. If action _is had 
in such a case, it must be by the members of the court as individuals,. 
and not officially. The Suprême Court has stated the situation then 
existing as to jurisdiction, in its opinion in the présent case, as fol- 
lows: 

"By constitutional and statutory provisions prior to the Judiciary Act of 
1892 original jurisdiction in equity M'as vested in the Suprême Court and 
circuit courts. Such jurisdiction was exerciscd by the Chlef Justice as chancel- 
lor, the flrst associate justice as vice chancellor, and, subséquent to 1862, 
by the second associate justice, acting scverally and not jointly, and from 
the décision of the chancellor, vice chancellor, or second associate justice an 
appeal lay to the Suprême Court in banco. Constitution 1852, art. 86 ; Con- 
stitution 1864, art. 68; Complled Laws 1SS4, §§ 847, 848. After the act of 1878 
(see Complled I.aws 1884, p. 389), and prior to the .Tudiciary Act of 1892, the 
several justices of the Suprême Court sltting at chambers, and the severat 
circuit judges, exercised original equity jurisdiction. A careful examlnation 
of the décisions shows that it vras the rule by Constitution, statute and practice 
for a single justice to slt in equity matters ; lus décision being subject tO' 
appeal to the Supremie Court in banco. To thls rule, custom, or practice 
there appears to hâve been only two exceptions, those In the cases of Tueker 
V. Estate of Metcalf and Kalakaua v. Keaweamahi, where, l>y agreement, tlie 
first-named cause was sulimitted to the Chancellor and Ilartwell, J., and in 
the latter cause a demurrer was heard in the flrst instance by the full court, by 
consent, for the purpose of expeditlng the dc('i'ee in the cause and maklng the 
décision on the demurrer final, analogous to resorving a question. The very 
fa et that in thèse two last cases nanied the submission to more than one 
justice was by consent tends to show the departure made in thèse cases from 
the usual practice in equity matters whoreln original jurisdiction in equity 
was exercised by a single justice sltting in equity at chambers. Thls prac- 
tice obtained at the tlme the will of the testatrix was written, had obtained 
for niany lyears prior thereto, and was in force at the time the will was 
probated and took effect." 

We adopt this statement as controlling, first, because it is a construc- 
tion by the highest court of the territory of the Constitution and laws 
thereof, as well as a judicial détermination of the practice and procé- 
dure obtaining on the equity side of her courts, and is therefore en- 
titled to great weight (Hawaii County v. Halawa Plantation, 239 Fed. 
836, 839, 152 C. C. A. 622; Kealoha v. Castle, 210 U. S. 149, 28 Sup. 
Ct. 684, 52 L. Ed. 998) ; and, second, because the holding, upon a re- 
view of the Constitution and statutes of the territory, seems to be a 
correct interprétation thereof as it relates to the question, in hand. 
In re Estate of Bernice Pauahi Bishop, 11 Hawaii, 33, cited by counsel 
for appellant, seems to lend support to this view. 

We hâve been aided greatly in our investigation of this matter by 
the very able analysis of the several Constitutions and statutes of the 



148 250 FEDERAL REPORTER 

territory, as they hâve been adopted and modified from time to time, 
contained in the brief of counsel for appellant. We are unable, how- 
ever, to adopt the conclusions reached respecting the effect in practice 
and procédure, as pertaining to equity jurisdiction, under such Consti- 
tutions and statutes. It was not until the Judiciary Act of 1892 (Lavvs 
1892-93, c. 57) that the Suprême Court became a purely appellate 
court, with the exception of such original jurisdiction as was reposed 
in it for the purpose of assisting its appellate functions. Wahiawa Su- 
gar Co. V. Waialua Agr. Co., 13 Hawaii, 109; Estate of Bernice Pauahi 
Bishop, supra. It is conceded that the circuit courts now hâve and 
exercise équitable jurisdiction over trusts. 

On the question of the intention of the testatrix, some analogous 
cases may be noticed. In Shaw v. Paine, 12 Allen (Mass.) 293, the 
testator provided that, whenever a vacancy should occur in the number 
of trustées, the surviving acting trustées should, by pétition, nominate 
a suitable person or persons, to be appointed by the judge of probate for 
the time being as such trustée or trustées, and, in default of such nomi- 
nation and appointment, it was directed "that a new trustée or trustées 
shall in every such case be appointed by the said judge of probate or 
by one or more of the justices of the Suprême judicial Court." A 
new trustée was nominated by the remaining trustées to the judge 
of probate, and by him appointed, and it was held that the judge of 
probate, in making the appointment, did not act officially, but under the 
will. In passing upon the case, the court said : 

"On the other hand, it is eqwally certain that it is not In the power of a 
testator to confer upon a judicial tribunal a jurisdiction which is not eon- 
ferred by law. If, tlierefore, a testator gives by lus will to a judicial otficer 
a power of appointment which the law does not give or sanction, the référence 
to the officiai charaeter must be regarded as only a description of the person 
who is to exécute the power." 

On further discussion, the court observed that a probate court has a 
duty to perform, as regards trustées who are made such by the act of 
the testator, in that the judge must approve the bond of such trustées. 
Then the court proceeds : 

"ïhis requirement of law seems to afford a sufflcient explanation of the 
testator's intention in requiring the judge of probate to 'appoint' the new 
trustées, whom the surviving or acting trustées are directed to 'nominate.' A 
nomination in conforniity with the will détermines the persons who are to 
be trustées." 

In National Webster Bank v. Eldridge, 115 Mass. 424, a similar dé- 
cision was rendered. In Moore v. Isbel, 40 lowa, 383, a trust deed 
contained a condition by which, upon the failure of the trustée to act, 
the acting county judge was authorized to appoint a successor, and it 
was held that the provision conferred the power of appointment upon 
the individual who fîlled the office of county judge at the time the ap- 
pointment was demanded. 

The cases cited by appellant do not disagree in principle with thèse ; 
the object being in every case to détermine, from the language and the 
attendant situation, the true intention and purpose of the testator. As 
was said in Léman v. Sherman et al, 117 111. 657, 665, 6 N. E. 872, 875 : 



IN KB BISHOP'S ESTATB 149 

"Where it Is manifestly the Intention of the testator to name the particular 
iudividual, wlio liolds the office of judge, as the donee of the power, his 
désignation as judge of a coaît will be regarded as niere descriptio personœ, 
and tlie power will be sustained, as vested in the man, and not in the office." 

Now, what do we fincl hère? We find a Suprême Court, consisting 
of three members, each member separately vested with the function 
of a chancellor, and in that respect possessing original, not appellate, 
jurisdiction. Collectively, however, the members hâve appellate juris- 
diction to revise the orders and decrees of the individual members. 
We must présume that the testatrix was aware of the construction and 
functions of the court, and of the individual members thereof , and, in 
naming a majority of the justices of the Suprême Court for making 
choice of trustées to fill vacancies, that she did so advisedly. In their 
appellate jurisdiction, a majority would prevail and détermine the 
controversy. If the testatrix intended that a majority of the court in 
its appellate jurisdiction should act, she could hâve made her meaning 
clear by simply investing the Suprême Court with the power of ap- 
pointment. If she had donc that, the court would necessarily hâve 
acted by majority, if ail the justices did not concur. If, however, they 
did concur, three justices would make the appointment, instead of a 
majority, or two. 

[2] Did she mean so to impose the power of appointment? Her lan- 
guage, under the conditions, is not apt for the purpose. She names a 
majority of the justices. As we hâve seen, each justice, acting apart 
from the others, was empowered to exercise équitable functions. Any 
two of them, however, might act together in the performance of such 
functions, and this would constitute a majority of the justices of *he 
Suprême Court. But, even yet, did the testatrix mean that they should 
so act? The justices in their work at chambers, under the practice and 
procédure, acted singly, and not in pairs, or by a concurrence of ail. So 
that, if she meant that the justices should act in their officiai capacity as 
chancellors or vice chancellors, again her language is inapt. But, if 
she meant that the justices should act in their individual capacity, then 
her language suits the occasion, and there is no inharmony or incon- 
gruity in her disposition of the power of appointment. It is therefore 
the more reasonable construction to suppose that the testatrix intended 
to impose the power of appointment upon a majority of the justices in 
their individual, and not in their officiai, capacity ; and we so construe 
the will, 

Further, the power of appointment, when exercised, is final. The 
vacancy or vacancies, whatever they may be, are filled by the act. The 
process of appointment ends there, and no court bas authority, except 
for just cause for removal, to disturb the appointment; that is to say, 
no court bas authority or power to review or supervise the appointment 
made by the justices. 

[3.] Now, as to the first question, the Organic Act of the territory 
(section 84) déclares that : 

"No person shall sit as a judge or jnror in any case in which his relative by 
affinity or by consauguinlty within the thlrd degree is interested, either as a 
plaintiff or défendant, or in the issue of which the said judge, or juror may 
hâve, either directly or through such relative, any pecuniary interest." 



150 250 FEDERAL EEPOETER 

This is the act relied upon as disqualifying the Suprême Justices to 
act on the circuit judge's order or decree; it being claimed that such 
justices hâve a personal, as well as a property, interest in the issue sub- 
mitted for décision. 

It having been ascertained that the power of appointment was dele- 
gated to the justices as individuals, and not as a court or judges there- 
of, it is scarcely discernible how they are affected, either personally or 
pecuniarily. It is absolute that they can hâve no pecuniary interest. 
They get nothing, and can expect nothing, by reason of an appointment 
to fill a vacancy, and can dérive no benefit from the act vvhatsoever. 
It is plain that the personal interest is only that v^rhich may arise from 
pride of opinion to hâve their choice of appointment sustained. This 
does not necessarily entail judicial bias. It is not claimed that it arises 
f rom any relationship to the parties, either by affinity or consanguinity. 
Hence, by déclaration of the Organic Act, they are not disqualified. 

Thèse considérations lead to an afifirmance of the Suprême Court, 
and such will be the order of this court. 



GRA'FF et al. y. RANKIN et al. 

(Circuit Court of Apijeals, Seventh Circuit. April 10, 1917. Rehearing 
Denied January 31, 1918.) 

No. 2404. 

1. WiLLS <Sï=5634(8) — C0N.STEUCTI0N — Vested ob Contingent Remaindeb. 

A testator devised land to a daugliter, tlien unmarrled, and lier law- 
ful issue. In case of lier marrlage lie requested that slie and lier hus- 
band should lease or make suoh other disposition of the land as would 
produce the most certain and largest Income, which he directed should 
be applied to the éducation and support of tlieir chlldren and of them- 
selves during the natural life of the daughter, at her death the property 
"to be equally distributed among her lawful issue and the légal représen- 
tative of any of her children that may hâve previously died, to be entitled 
to the same share that his or her parent would hâve been if then living." 
If the daughter should die "without leaving any lawful issue," the land 
should descend to and be equally divided among her brothers and sisters 
and their lawful issue. Held, that the children of the daughter took no 
vested interest in the remainder at their birth ; the remainder not 
being to her children, but directly to her "lawful issue" living at the 
tiine of her death, subject to the further limitation that grandchildren 
together took the share of a deceased parent, and that until the time 
of her death it was contingent. 

2. Guardian and Ward <®=>79 — Pbopebty Sxjbject to Sale — Contingent In- 

terest. 

Under the law of Illinois, as established by décision, a contingent in- 
terest in land is not subject to transfer, either at private or at guardian's 
sale. 

3. Remainders <S=>16 — Sale of Pbopebty under Ordee of Court. 

A court of equlty lias power in a proper proceeding to order the sale of 
real estate, where it appears that unless such action is taken the property 
will be lost both to life tenant and remalnderman, and to extinguish ail 
interests therein, whether vested or contingent, and in Illinois persons 
then in being and properly before the court will be deemed to represent 

<g=5For other cases see same topio & KBY-NUMBEB in ail Key-Numbered Dlgests & Indexes 



GEAFF V. EANKIN 151 

the Interests of those unbom members of the class whose Interests are 
slmilar to theirs. 

4. Guardian and Ward ®=3lll — Sale or Propebty undbb Oeubb of Cotjet— 

Intebest Conveyed. 

A guardian, as sueh, brought a suit in a chancery court of Illinois, 
asking that land in whieh his ward had a contingent interest in remainder 
and also an équitable interest in the life estate, which was in her motlier, 
be sold, and the proceeds reinvested where it would be more bénéficiai to 
the ward. The ward was alone made défendant, and answered by a guar- 
dian ad litem. A sale was decreed, and the guardian was directed to re- 
port reinvestments to the probate court. Held, that the only interests 
which the court had jurlsdlction to sell in siich proceeding were those of 
the ward, and that since, under the law of the state, a contingent interest 
was not subject to sale, the pnrchaser took only the ward's équitable in- 
terest in the life estate, given her by the will of her grandfather, and 
which terminated with the life estate. 

5. Adverse Possession <S=>77 — Title or Interest Acquibed. 

ïhe deed made pursuant to such decree, however, which purported to 
convey the entire Interest, gave the grantee color of title, and, when 
follovved by exclusive possession and payment of taxes for more than 20 
years, divested the estate of the life tenant; but, under the law of the 
state, limitation did not begln to run against the contingent remaindermen 
until the death of the life tenant 

6. Guardian and Ward <S=>108 — Sale of Peopebtt — Title ob Intebest Ac- 

QuiHED — Contingent Remaindermen — Notice or Rights. 

Notwithstanding the fact that the will of the record owner of the 
land, under which ail interests were derived, was not properly recorded 
in the county where the land was sltuated, the grantee in the deed was 
chargeable with notice of its provisions, where the deed reclted the decree, 
and both the decree and the pétition on which It was based clearly re- 
ferred to the will and its place of probate. 

7. Guardian and Ward (®=3&8 — Sale of Pbopebtt — Interests Acquibed — 

Contingent Remaindermen. 

In the proceeding by the guardian, the court acquired Jurisdiction 
only to sell the minor's interest, and could not, as It did not purport to, 
give a construction to the will on which the purchaser had a rlght to rely. 

Appeal from the District Court of the United States for the North- 
ern Division of the Southern District of Illinois. 

Suit in equity by Minnie A. Rankin and Alexander C. Rankin against 
Charles Frederick GrafF and Emily B. Graff. Decree for complain- 
ants, and défendants appeal. Reversed. 

Certiorari denied, 247 U. S. , 38 Sup. Ct. 578, 62 L. Ed. , 

Logan Hay, of Springfield, 111., and Fred H. Hand, of Cambridge, 
m., for appellants. 

Wm. J. Graham, of Aledo, 111., and Charles J. Scofield, of Carthage, 
m, for appellees. 

Beîore BAKER, MACK, and EVANS, Circuit Judges. 

MACK, Circuit Judge. This is an appeal from the decree of the 
District Court quieting and confirming the title of the complainants, 
Alexander C. Rankin and his wife, Minnie A. Rankin, to certain lands 
in Mercer county, 111., as against the claims of the défendants, Charles 
Frederick Graff, his wife, Emily B. Graff, and Wilbur F. Gilder, hus- 
band and sole devisee of Netta Graff Gilder, deceased, and dismissing 

<t::s>For otber cases see saine topic & KEY-NUMBEÎR in ail Key-Numbered Digests & Indexes 



152 250 FEDERAL REPORTER 

for want o£ equity the cross-bill of défendant Charles F. Graff for pos- 
session and accountir- 

Romulus Riggs th. estator, died in the fall of 1846, seised of the 
land in controversy. He devised it by the sixth section of his will, 
which reads as f ollows : 

"I give and devise to niy daughter, Illinois Riggs, and to her lawful Issue 
for thelr only proper use and beiiefit tlie foUowing described thirteen quarter 
sections of land witli the appurteuances thereunto belonging, containlng one 
liundred and sixty acres eacli, more or less. ïhe said lands lying and belng lu 
Mercer county and state of Illinois as foUovvs, to wit: N. E. %, 23, 14 north, 
;5 west [and deseribing 12 other quarters]. If my daughter, Illinois Riggs, 
should marry and hâve lawful issue I request that her lawful husband whoni- 
soever he may be will act in conjunctlon witli his wife, my daughter, Illinois, 
as the agent and guardian of their children and that they will lease out or 
make such other disposition of the said thirteen quarter sections of land as 
will produce the most certain and largest Income, which income It Is my will 
and direction shall be applied to the éducation and support of their children 
and to the support of themselves during the natural life of my said daughter, 
Illinois, and at her death it is my direction that as many of their children 
as shall be twenty-one years of âge or if they be daughters and marrled be- 
fore that time then at eighteen years of âge they shall at once receive their 
equal proportion of said property, and their lawful father, my son-in-law, 
whomsoever he may be, if then living, shall continue to receive and control 
the income from the balance of the property for the sole use and benefit of 
such of my daughter, Illinois' children as may be under lawful âge at their 
mother's death, and shall deliver to each child his or her equal proportion 
of the same so soou as they become twenty-one years of âge, or if there shall be 
daughters and they are marric*d before that time then they are to receive 
their proportion at eighteen years of âge, so that at the time the youngest 
child of my daughter, Illinois, shall be of lawful âge, the property and in- 
come from the same will be equally divided among them and their lawful 
father, my son-in-law, whomsoever he may be, will be fuUy discharged from 
guardianshlp and hâve no ûirther control or interest in the saine. Neverthe- 
less, if any or ail of my daughter Illinois' children should arrive at lawful 
âge before her death, the property is not to be divided among them during her 
lifetime, but to remain with her and her husband for their mutual use and 
benefit of them ail until her death when it is to be equally distributed among 
her lawful Issue and the légal représentative of any of her children that 
may bave previously died, to be entltled to the same share that his or her 
parent would hâve been if then living. If, however, my said daughter, 
Illinois Kiggs should die without leaving any lawful issue, then I direct that 
the above described thirteen quarter sections of land with tlie appurtenauces 
shall at her death descend to and be equally divided among her brothers and 
sisters and their lawful issue, in the same manner as they would hâve de- 
scended to her issue had she left any." 

His will was duly probated at testator's domicile in the county of 
Philadelphia, state of Pennsylvania, and was recorded in Adams coun- 
ty and Mercer county, 111., in 1849 and 1874, respectively, but before 
the commencement of this suit the necessary statutory certificate of 
probate had not been filed for record. 

Illinois Riggs, to whom the testator's Mercer county lands were de- 
vised, was a spinster at the time of his death. In March, 1847, she 
married Charles H. Graff. In 1848 a daughter was born to them. On 
July 29, 1853, Charles H. Graff was appointed by the county court of 
Peoria county, 111., guardian of his niinor daughter, Netta. On August 
2, 1853, he filed on the chancery side of the circuit court of Mercer 
county a pétition to sell real estate, reciting the exécution and probate 



GRAFF V. RANKIN 153 

in Philadelphia of the will of Romulus Riggs, tlie substance of the 
sixth clause, the petitioner's marriage to Illinois, the birth of their 
child, Netta, her minority, and his appointment as her guardian by the 
county court of Peoria, III. He further alleged that Netta had no prop- 
erty of any kind applicable to her éducation and support as contem- 
plated by the will of the testator, that the taxes upon the land were 
heavy, that the lands, being wild and uncultivated, produced no inconie 
whatever, and that no money was thus received to préserve them from 
waste. The petitioner thereupon charged and prayed that the pro- 
ceeds of the sale thereof be invested in such manner that a yearly in- 
come could be derived therefrom, to be applied towards the éducation 
and support of Netta Grafif, that Netta Graff be made a party to the 
proceedings, and that a guardian ad litem be appointed. Affidavit of 
her nonresidence was duly filed; a decree was entered at the April 
term, 1854, which, after reciting due notice to the défendant of the 
pendency of the suit, appointed a guardian ad litem ; and thereupon, 
after further reciting the filing of an answer by him, the decree found 
the facts as set out in the pétition, and ordered the property to be sold 
by a commissioner and deeds to be executed by him to the purchasers. 
Pursuant to this decree, the land was sold and conveyed to one Thom- 
as Morehead, by deed dated and recorded in June, 1854. This commis- 
sioner's deed recited the decree in hœc verba. By mesne conveyances 
the property came to the complainant, Alexander C. Rankin ; he and 
those under whom he claimed hâve held possession thereof in good 
faith and regularly paid the taxes thereon since 1854. 

Netta Grafif, who had married Wilbur F. Gilder, died in 1897, with- 
out having had a child born to her. Her husband, the sole beneficiary 
under her will, was a party défendant to thèse proceedings, but dis- 
cfaimed any interest and did not join in this appeal. Charles Freder- 
ick Grafif, the other and younger child of Illinois, the principal défend- 
ant herein, was born in 1862. It was to quiet and establish their title, 
as against his threatened ejectment action, that the complainants 
brought their bill in March, 1913. To the amended bill, filed in Octo- 
ber, 1915, défendants filed their answer, including a cross-complaint. 

Plaintifïs contend : First, that Morehead, their remote grantor, se- 
cured a valid title to the property in controversy by virtue of the pro- 
ceedings in the circuit court of Mercer county in 1853 ; second, that, 
if the légal title were not transferred as the resuit of such proceedings, 
they neverîheless acquired title under both sections 1 and 6 of the limi- 
tation act (Illinois Revised Statutes, c. 83) ; third, that, in any event, 
the défendant Charles Frederick Grafif is debarred by his lâches, and is 
estopped from asserting any rights, in view of his own delay and plain- 
tifïs' érection of valuable improvements upon the land in the honest 
belief of ownership. The défendants, denying plaintiflfs' contention, 
seek possession by their counterclaim. 

If the estate limited to the children of Illinois by the will of her 
father, Romulus Riggs, vested in each at its birth, rather than at the 
death of Illinois, Netta's vested interest was subject to a decree of sale 
on pétition to the proper court in order to provide for her éducation 
and support, and, if the commissioner's sale was thus made, the pur- 



154 250 FEDERAL REPORÏEU 

chaser acquired that vested interest. Since the remainder, if vested, 
was subject to open to let in her brother subsequently born, the interest 
thus sold would be an undivided half of the remainder, snbject to Il- 
linois' life estate. If, however, the remainder was contingent, then in 
Illinois it was not subject to transfer either at prîvate or at guardian's 
sale, and in that event, subject only to the question hereinafter con- 
sidered as to whether the Mercer county proceedings were for a guard- 
ian's sale, the commissioner's deed conveyed no title to Morehead. 

[1] 1. We therefore consider, in the first place, the nature of the 
interest acquired by the children of Illinois under the will. The direct 
devise to Illinois Riggs and her lawful issue is limited and explained by 
the subséquent provisions. Concededly, Illinois obtained only the lé- 
gal life interest, subject to an équitable charge on the income for the 
support and éducation of her children and for the support of herself 
and her husband. Concededly, too, the provision, authorizing Illinois 
and her husband to "lease or make such other disposition of the said 
thirteen quarter sections of land as will produce the most certain and 
largest income," did not empower them to sell the fee. 

To support their contention that the interest of the children, other 
than their équitable interest in the life estate, is but a contingent re- 
mainder, défendants urge certain clauses of the will, which they con- 
tend indicate that the testator's scheme for the division of his estate 
contemplated that his grandchildren's interest should be contingent up- 
on their surviving their mother. They further contend that the Illinois 
court bas in past décisions placed such a construction upon similar ex- 
pressions that thèse words hâve obtained in Illinois property law a pri- 
mary meaning, which the courts should apply, in the absence of an ex- 
press contrary intention or other strong counterbalancing considéra- 
tions. The important clauses are those providing that at Illinois' death 
the property "is to be equally distributed among her lawful issue and. 
the légal représentatives of any of her children that may bave previ- 
ously died, to be entitled to the same share that his or her parent would 
bave been if then living." Légal représentatives, in the light of the 
context, clearly refers to the grandchildren of Illinois. "If, however, 

* * * Illinois should die without leaving any lawful issue, then 

* * * the land * * * shall at her death descend to and be 
equally divided among her brothers and sisters and their lawful issue." 

The remainder is not, as in Lackenmyer v, Gehlbach, 266 111. 11, 
107 N. E. 202, to the children of Illinois with a gift over, in case any 
child die in her lifetime, to the children or légal représentatives of 
such child; it is directly to "her lawful issue," with the further limi- 
tation that grandchildren together take a deceased child's share. The 
gift to the issue, including such grandchildren, is, however, expressed 
as direct, not as substitutional ; the remainder is not to children, sub- 
ject to be divested, in case of a child's death, in favor of that child's 
children, but to lawful issue. Clearly, however, ail descendants do 
not take at birth ; it is not a gift to the class of descendants. Further- 
more, the remainder is not to "lawful issue and légal représentatives" 
of deceased children; this clause as to the légal représentatives merely 
describes the extent of their interest, a child's share — in other words. 



GRAFF V. RANKIN 15o 

a direction that the division is to be per stirpes among her lawful is- 
sue. Eut among whicli of tiie lawful issue, if issue is net the whole 
class of descendants? Clearly only such children as survive Illinois 
and the descendants surviving her of deceased xhildren. 

Even in the case of a direct remainder to children, with a gift over 
to the surviving issue in case a child die before the life tenant, the 
statement that the issue of the child so dying shall take the share 
which "the parent would hâve taken if living at her death" is deemed 
sufficient to indicate an inteiit that only such children and issue of de- 
ceased children as survive the hfe tenant shall take; the remainder is 
held contingent. People v. Byrd, 253 111. 223, 97 N. E. 293 ; Cum- 
mings V. Hamilton, 220 111. 480, 77 N. E. 264. See, however, People 
V. Carpenter, 264 111. 400, 106 N. E. 302, involving only personal prop- 
erty, in vi'hich the earlier cases were not cited, and thèse significant 
words not commented upon. If, as vv^e believe, People v. Byrd is a 
correct statement of Illinois law, then a fortiori must the remainder to 
the lawful issue of Illinois, a direct, not a substitutional, remainder, 
both as to children and grandchildren, be deemed, in view of the sub- 
séquent clause, a remainder to such of Illinois' children as survive her 
and the descendants surviving her of such of them as may die in her 
lifetime; clearly a remainder subject to the condition précèdent of 
surviving Illinois, and therefore contingent. Pitzer v. Morrison, 272 
m. 291, 111 N. E. 1017, and McClintock v. Meehan, 273 111. 434, 113 
N. E. 43, cited by plaintifïs, cast no doubt on this conclusion. 

The gift over to Illinois' brothers and sisters tends to confîrm this 
interprétation ; it is not to take place in the event of Illinois dying with- 
out lîaving had issue, the natural expression if the interests of Illinois' 
children vested upon their birth, but only in case Illinois dies without 
leaving any lawful issue. If the estâtes limited to the children of Illi- 
nois were held to be vested remainders, they would be divested by this 
clause in favor of Illinois' brothers and sisters, the testator's own chil- 
dren, only in case no descendant survived Illinois; but, if any one 
descendant survived her, then not only would that descendant hâve the 
entire disposition of his estate, but those children who died childless 
before her could hâve devised their vested interest to strangers. On 
the other hand, if, as we hold, the remainder to' Illinois' children and 
their descendants is contingent, then on Illinois' death the property 
must go to the testator's own family — either to Illinois' descendants, 
if any survive her, or, if none, then to her brothers and sisters. 

It follows, therefore, that Netta Graff, at the time of the sale of the 
land under the order of the circuit court of Mercer county, 111., had 
only a contingent interest in the remainder. 

[2] 2. If the proceedings in the Mercer county circuit court were 
merely a guardian's sale of the minor's estate, either by virtue of the 
statute or under the gênerai power of a court of chancery over the 
property of minors, no interest in the remainder was thereby acquired, 
because, in the first place, that contingent interest never became vested 
in fact, and, in the second place, under Illinois law, a contingent inter- 
est is not the subject-matter of sale. Hill v. Hill, 264 111. 219, 227, 
106 N. E. 262. At the best, the purchaser acquired Netta's équitable 
interest in the life estate, which expired at her death. 



156 250 i'EDEUAL REPORTER 

[3J But it is urged that the suit in chancery in the circuit court of 
Mercer county was more than a guardian's proceeding to sell liis 
ward's property; that it was a suit to save ail interests in the land, 
by a sale thereof and reinvestment of the proceeds. There can be no 
doubt of the power of a court of equity, in a proper proceeding, to 
order the. sale of real estate when it is necessary for the préservation 
of the estate; and where it appears that, unless such action is taken, 
the property will be lost both to life tenant and remainderman, a court 
of equity may decree the sale of the real estate, so as to extinguish ail 
interests therein, whether contingent or vested. Gavin v. Curtin, 171 
m. 640, 49 N. E. 523, 40 h. R. A. 776; Balridge v. Coffey, 184 111. 73 , 
56 N. E. 411 ; Thompson v. Adams, 205 111. 552, 69 N. E. 1. It is 
further clear that in Illinois persons then in being and properly before 
the court will be deemed to represent the interests of those unborn 
members of the class whose interests are similar to theirs ; and this, be- 
cause they are not likely to suffer as long as ail living persons similarly 
interested in the property are made parties to the suit. Haie v. Haie, 
146 m. 227, 33 N. E. 858, 20 L. R. A. 247. 

[4] Hère, however, no attempt was made to extinguisti ail présent 
interests in the property ; neither Illinois, the légal life tenant, nor the 
heirs of Romulus Riggs, as owners of the reversion, subject only to 
the contingent remainder, were made parties défendant. Whether in 
Illinois, under such a proceeding, a vested remainder might be sold, 
so as to bind unborn members of the class, even if, for want of juris- 
diction over the life tenant, the life estate is not divested, we need not 
détermine; for we hâve held that Netta's interest in the remainder 
was contingent, not vested. And while if, in addition to the living rep- 
résentatives of the contingent interests, the owners of ail vested légal 
interests were subject to the jurisdiction of the court, the land might be 
sold, and thereby the contingent remainders destroyed, just as at com- 
mon law and in Illinois (Bond v. Moore, 236 111. 576, 86 N. E. 386, 19 
L,. R. A. [N. S.] 540) contingent remainders would be destroyed if the 
owners of the vested interests merged their titles, the court was as 
powerless as the contingent beneficiaries to effectuate a valid convey- 
ance in Illinois of the contingent remainders as such. 

Furthermore, however, it is perfectly clear, from every step in the 
proceedings, that no attempt was made to hâve the court do more than 
decree the sale of a minor's estate. The suit was brought by the guard- 
ian ; as such, he had no légal or équitable interest in the property ; as 
guardian, he could not properly hâve been the complainant in a suit 
to sell the entire property in order to save the interests of ail concerned. 
The ward was the sole défendant ; she was made such in her personal, 
and not in any représentative, capacity. The decree provided that re- 
ports of reinvestment be made, not to the circuit, but to the county, 
court, and necessarily in the matter of the estate of the minor, Netta 
Graff. Hers was the sole interest attempted to be protected or dis- 
posed of ; no provision was made or prayed for in the interest of any 
other parties, living or unborn. And, while the decree ordered the 
sale of the land, a purchaser thereunder could acquire at best only 
such interest therein as the court, under its jurisdiction over the per- 



GKAFF V. KANKIN 157 

sons and subject-matter, could effectually direct to be sold. We con- 
clude, therefore, that under thèse proceedings, nothing more than Net- 
ta's interest in the life estate could be passed to the purchaser. 

[5] 3. The commissioner's deed, however, gave to the purchaser 
color of title to the entire property. He and his successors hâve paid 
ail taxes, and hâve held open, noterions, exclusive, and adverse posses- 
sion under claim and color of title, for more than 20 years. Clearly 
the légal life estate of Illinois was thereby divested, and with it nec- 
essarily the équitable charges thereon. And if the entire légal fee had 
been vested in Illinois, in trust for her issue, they as cestuis que trustent 
would hâve been barred, irrespective of the nature of their équitable 
interest. Waterman Hall v. Waterman, 220 111. 569, 77 N. E. 142. 

But, in Illinois, both independently of and by virtue of section 3 of 
the limitation act (Revised Statutes, c. 83), to that extent limiting both 
sections 1 and 6 of that act, neither the 20 nor the 7 year period begins 
to run against a contingent remainderman until the expiration of the 
life estate; in this case, until the death of Illinois. Weigel v. Green, 
218 m. 227, 75 N. E. 913. If Nelson v. Davidson, 160 111. 254, 43 N. 
E. 361, 31 E. R. A. 325,52 Am. St. Rep. 338, though contrary to the 
implications both of earlier and later décisions, represents the présent 
law of Illinois, its scope is not to be extended; the reason there as- 
signed for holding that the statute of limitations will begin to run 
against a vested remainder before the terraination of the life estate, 
namely, that the vested remainderman might bave protected himself by 
paying the taxes and is in default in not so doing, is entirely inap- 
plicable to a contingent remainder. 

[6] It is contended, however, that this limitation on the acquisition 
of title by adverse possession, whether common-law or statutory, is 
not applicable in favor of a remainderman, claiming under a will not 
properly recorded; that inasmuch as, against such a claimant, a bona 
fide purchaser of the property without actual or constructive notice of 
the rights under the will is protected under section 30 of the record- 
ing act (Hurd's Rev. St. 1917, c. 30), it is immaterial whether such 
purchaser acquires title f rom the heirs of the testator, or only color of 
title followed by adverse possession and payment of taxes for the stat- 
utory period. In support thereof, Dugan v. Follett, 100 111. 581 (fol- 
lowed by Eewis v. Barnhart, 145 U. S. 56, 12 Sup. Ct. 772, Z6 L. Ed. 
621, and Lewis v. Pleasants, 143 111. 271, 30 N. E. 323, 32 N. E. 384), 
is relied upon. 

In Dugan v. Follett, several properties and conveyances were in- 
volved ; the court did not distinguish between them. As to one of 
the properties, the case holds in efifect that a purchaser, X., f rom A. and 
B., who do not appear in the record chain of title, and whose only lé- 
gal right is under an unrecorded conveyance from the record owner 
granting a life estate to A., with remainder to B., C, and D., has good 
title, after the statutory limitation period has expired, as against C. and 
D., if at the time of purchase X. had neither actual nor constructive 
notice of C.'s and D.'s rights; further, that X. is not constructively 
charged with notice of the interests acquired by C. and D. under the 
unrecorded deed from the record owner by reason solely of the fact 



158 250 FEDERAL REPORTER 

that X. can trace his record title only through that deed. Whether 
this case and the Lewis Cases correctly represent the présent law of 
Illinois on this subject, and whether the limitation period is of any 
moment in the détermination of the issues, we need not inquire. See 
Weigel V. Green, 218 111. 227, 75 N. E. 913. For clearly the court did 
not détermine, and did not intend to détermine, that X. would not be 
chargeable with notice of the rights of C. and D., if in the deed to 
X. the grantors, A. and B., had recited the deed from the record own- 
er to A., B., C, and D. in such a way as would hâve enabled X. to learn 
its provisions. 

In the instant case, the deed of the commissioner, the decree of the 
court, and the pétition on which it is based, ail refer clearly and un- 
equivocally to the will of the record owner, Romulus Riggs, as proven 
in the courts of Philadelphia, Pa. ; thereby the grantee was charged 
with notice of its provisions, as fully and efïectively as if the will and 
the proper certificate of its probate had been recorded in Mercer 
county before the commencement of those proceedings ; neither he nor 
any one claiming under him came within the protection of section 30 
of the recording act as a purchaser without notice. Weigel v. Green, 
supra. 

[7] But plaintifïs urge that, if by thèse proceedings they are charge- 
able with notice of the will, then they hâve a right to rely on the con- 
struction thereof by the court ; and they further urge that, as the court 
directed the sale of the land, it necessarily construed the will as grant- 
ing such an interest, be it to Netta Graff alone, or to the class of which 
she was the living représentative, as enabled the commissioners to con- 
vey the complète title. The proceedings, however, were not to coh- 
struethe will, but to sell a minor's interest; the court acquired juris- 
diction only over her interest in the land ; neither the property, vested 
or contingent, of other persons, nor the persons themselves, were sub- 
ject to the jurisdiction of the court; it is elementary that, as to them 
and to their interest, if any, in the land, the decree was without any 
binding force. Peterson v. Jackson, 196 111. 40, 63 N. E. 643. More- 
over, the decree does not purport to construe the will or to détermine 
any rights thereunder. And while reliance thereon may évidence the 
good faith of the original purchaser at the commissioner's sale, it 
does not relieve him from constructive notice of the will and its pro- 
visions as they may be construed and determined by a court having ju- 
risdiction of the parties and the subject-matter. 

4. Plaintifïs, however, urge that an exception to the rule that the 
statute of limitation begins to run against a remainderman only at the 
expiration of the life estate must be implied, if the remainderman is 
also interested in the life estate and has permitted his interest therein to 
be barred. We need not consider whether under any circumstances 
this contention is sustainable. McCoy v. Poor, 56 Md. 197; contra, 
Mara v. Brown, 1895, 2 Ch. 69, 96; Eranke v. Berkner, 67 Ga. 264; 
East Rome Town Co. v. Cothran, 81 Ga. 359, 8 S. E. 72,7. For, in the 
instant case, défendant Grafï, after he became of âge, could not hâve 
brought or caused to be brought any effective action against plaintifïs. 
His was an équitable interest in his mother's légal life estate; many 



GBAFF V. EANKIK 159 

years before he became of âge that estate and the équitable interests 
dépendent thereon had been lost by limitation. 

5. Nor can défendant Graff be charged with lâches because of any 
act or conduct prior to 1911. He was under no duty and therefore 
is charged with no wrongdoing or négligence for failure to attempt to 
compel his mother to begin what inevitably, after he became of âge, 
would hâve been an unsuccessful action to recover the life estate. 
With his Personal rights against his mother for her failure during his 
infancy to protect his interests, plaintifïs are not concerned. Even, 
if he knew of his prospective rights in the contingent remainder, he 
owed no duty to plaintiff, either to assert them before he could success- 
fuUy do so, or to notify them of an intention to assert them if and 
when they should become vested. He had no better knowledge than 
they of the f acts ; they were chargeable with notice of the will and its 
probate ; he, at best, had actual knowledge of its contents ; each had 
the same opportunity to ascertain and to détermine what rights were 
conferred thereunder. 

6. Within two years after Graff's interest was vested, this suit was 
begun, and ejectment proceedings thereby hindered. During that time, 
plaintifïs did not change their position. The delay in no manner af- 
fected or could affect the évidence in this case. Irrespective, there- 
fore, of plaintiff's inability to base aiifirmative relief of the cbaracter 
hère sought on lâches, or on any weakness in defendant's title, and 
without determining whether or not lâches is a proper défense to a 
counterclaim based on strictly légal rights, sought to be enforced in 
equity only because plaintiff had haled défendant into that forum, 
we are of the opinion that défendants Graff are not chargeable there- 
with. 

7. Every élément of an estoppel as against Graff is absent from the 
case; he made no misrepresentations ; he was not silent when duty 
compelled him to speak; plaintiffs did nothing in reliance upon or 
because of his position, other than to pay the taxes that accrued 
after 1911 ; and during that period they enjoyed the possession of the 
premises. 

8. It follows, therefore, that plaintiffs can recover nothing under 
their bill, and that défendants are entitled to relief under their answer 
as a cross-bill. As plaintiffs, however, made their improvements in 
good-faith belief in their ownership of the land, equity requires that the 
accounting be limited to the fair rental value of the land, without im- 
provements, from March, 1911, less the taxes thereon paid by plain- 
tiffs, cmd chat the decree therefor and for the possession be condi- 
tioned upon défendant paying the enhanced value of the premises, due 
to the improvements now thereon and madq by plaintiffs or their pred- 
ecessors in title. 

The decree will be reversed, and the cause remanded for further 
proceedings in accordance with the views herein expressed. 



160 250 FEDERAL REPORTEB 

GENERAL INV. CO. v. LAKE SHORB & M. S. RT. CO. et al. 

(Circuit Court o£ Appeals, Slxth Circuit. February 16, 1918.) 

No. 2939. 

1. Eemoval 01' Causes <&=»106 — Remand — Waiveb or Rtght. 

If gênerai fédéral jurisdlction exists, the want of local Jurlsdiction or 
venue in the particular fédéral court to wliich a cause lias been removed 
Is waived, where the plalntifC, after the removal, without challenging 
such jurisdlction by motion to remand or otherwise, consents to and 
accepta such jurisdlction by affirmative acts in récognition thereof and 
invoking its exercise. 

2. CoTmTS <S=»12(3) — Jukisdiction — Foreign Corporations — Subjection to 

State Process. 

A foreign corporation is not amenable to process in a court of another 
State, unless it is actually doing business In that state of such character 
and estent as to warrant the inference that It bas subjected itself to the 
jurlsdiction and laws of sucli state and the process is served on an au- 
thorlzed officer or agent. 

3. Removal op Causes iS=>112 — Jubisdiction of Parties Acquibed — Validi- 

TT OF Service. 

The validity of the service of process in a state court roay be questioned 
after removal to a fédéral court; the sherlffi's retum not being conclu- 
, .'Sive, and the question of jurisdlction being one for the ultimate déter- 
mination of the fédéral court. 

4. Corporations <S=»642(4%) — Foreign Corporations — "Doinq Business" in 

State. 

The New York Central & Hudson River Rallroad Company, a New York 
corporation, owned no road and maintalned no office or agent in Ohlo, 
but its road was operated in connection with that of the Lake Shore & 
Mlchigan Southern Railway Company, which ran through that state; 
through trains over the two Unes being run betvveen New York and 
Chicago. Agents for both companies sold tickets good over either or 
both Unes under the gênerai name of "New York Central Lines"; the 
proceeds being divlded at perlodical settlements accordlng to the service 
rendered by each company. Held, that the Central Company did not do 
business in Ohio, and that a court of that state did not obtaln jurisdic- 
•(tion over It by service of process on an agent of the Lake Shore Company. 

[Ed. Note. — For other définitions, see Words and Phrases, First and 
Second Séries, Doing Business.] 

5. EguiTT <S=>362 — Ground for Dismissal — Dbfects as to Parties. 

A court of equlty cannot make a decree between the parties betore 
it which necessarily affects the rights of an absent person, who is in 
such case an indispensable party ; but a blU is not to be dismissed In its 
entlrety, because of the absence of a person who is indispensable to 
granting ail the relief prayed for, if there is any separable matter as 
to which complète relief may be given, not afCectlng the rights of such 
absent person. 

6. Corporations <®=>201 — Surr to Enjoin Voting of Stock — Parties. 

A stockholder in a corporation Is an indispensable party to a suit to 
enjoin hlm from voting hls stock at a stockholders' meeting. 

7. Corporations <S=3584 — Surr to Enjoin Meeger — Parties. 

To a suit by a stockholder to enjoin the corporation from entering 
Into an Illégal merger with another corporation, such other corporation 
need not be made a party, where it has acquired no vested contract right 
In the proposed consolidation, although it may own the majority of the 
stock of the flrst corporation. 



^saFor otJier cases see same toplc & KBY-NUMBER in ail Key-Numbered Dlgests & Indeiea 



GENERAL INV, CO. V. LAKE 8HORE & M. 8. EY. OO. 161 

8. Corporations <S=189(9)— Suit by Stockholdee— Parties. 

To a suit by a stockholder for tlie appointment of a receiyer of stocka 
of subsidiary companies alleged to be held illegally by tbe corporation, 
and for the disposition of such etocks another stockholder, although own- 
ing the majority interest, is net an indispensable party. 

9. Courts <3=:o351% — Motion to Dismiss — ^Dismissau as to Part of Bill. 

A motion to dismiss made under equlty rule 29 (198 Fed. xxvi, 115 O. 
G. A. xxvi), going to the entire bill, as in case of a demurrer under the 
old practice, must fall, if any part of the bill is good against it; but 
where there is a defect of parties, which would prevent the court from 
granting a part of the relief prayed for, the court may properly dismiss 
so much of the blU as relates to that matter. 

10. Corporations <S=>189(11) — Suit by Stockholdee— Sufficienoy of Bill. 

A bill by a stockholder to enjoin the corporation from dolng an illégal 
act held sufficient on its face against a motion to dismiss. 

11. Corporations iS=>189(11) — Stockholders' Suits — Sufficiency of Bill. 

Equity rule 27 (198 Fed. xxv, 115 C. C. A. xxv), prescribing the requi- 
sites of a stockholder's bill, relates only to suits "founded on rights which 
may properly be asserted by the corporation," and does not apply to a 
bill by a stockholder in his own right against the corporation to enjoin 
it from doing an illégal act 

12. Corporations <S=»584— Suits bt Stockholder — ^Adéquate Remedy at 
Law. 

Gen. Code Ohio, § 9034, providing the compensation which shall be paid 
for the stock of a stockholder who refuses to exchange his stock for 
that of a Consolidated company, is intended to apply only to lawful con- 
solidations, and does not afCord an adéquate remedy to a stockholder 
who seeks In advance to restrain the corporation from entering into an 
Illégal consolidation. 

13. Courts (g=347 — Supplemental Bill — Orange in Natuee of Suit. 

Under equity rule 34 (198 Fed. xxviii, 115 C. O. A. xxvlii), providing 
that the court may permit a complainant to file a supplemental bill "al- 
legiiig material facts occurring after his former pleadlng," if a com- 
plaiuant's original bill is sufficient to entitle him to one kind of relief 
and facts subsequently occur to entitle him to other and more extensive 
relief, he may hâve such relief by setting out the new matter in the form 
of a supplemental bill, even though the nature of the suit would m 
effect be thereby changea. 

14. QuiETiNQ Title <3=»12(3) — Cloud on Title — Bight to Maintain Suit — 
Possession. 

The gênerai equity rule that a blU to remove cloud from title can only 
be filed by one in possession does not prevent the maintenance of such a 
bill by one not in possession, where there are other grounds for équitable 
relief. 

15. QuiETiNG Title iS=»12(3) — Suit to Remove Cloud — Possession. 

Where the légal title to the property of a corporation and its posses- 
sion hâve passed from it to a Consolidated company through an illégal 
consolidation, a stockholder is not debarred from maintaining a suit to 
hâve the proceedings by which the consolidation was effected set aside 
as a cloud upon the title of the corporation by the fact that neither he 
nor the corporation is in possession. 

16. Appeal and Eîbror (3=3&59(2) — Equity <S=»297 — Supplemental Bill — 
Discrétion of Court — Review. 

The granting or refusing of leave to flle a supplemental bill rests in 
the discrétion of the trial court, and is not reviewable by an appellate 
court, unless there has been a gross abuse of discrétion ; and matters 
which would not hâve constituted such a want of equity as to prevent 
the maintenance of an original bill may properly be considered in de- 

«=»For other cases see same toplc & KKY-NUMBBR In ail Key-Numbered Dlgests & Indexe» 
250 F.— Il 



162 250 FEDERAL BBPOETEB 

termining whether, in the exercise ot souiid judldal discrétion, leave 
should hâve been granted to flle a supplemental bill as a matter of grâce. 
17. Eqdity ig=3297 — ^I/EAVe to Fixe Supplemental Bill — Discrétion or 
Court. 

Complainant acquired 5 shares of stock of défendant railroad Com- 
pany, out of 499,961 shares outstanding, two months after the date of 
an agreement for consolidation between défendant and a number of 
other companies, which agreement was afterwards approved by defend- 
ant's stoclvholders ; only 77 shares, besides complainant's, belng voted 
against it. Under the laws of the state, dissenting stockholders were 
entitled to receive for their stock its highest market value during the 
preceding two years. After the consolidation was ettected, the Consoli- 
dated Company executed mortgages on its property, securing bonds to 
the amount of $365,000,000. A bill had previously been flled by com- 
plainant to enjoin the consolidation, and after it was ettected complainant 
asked leave to flle a supplemental bill to set it aside as a cloud on de- 
fendant's title. ïhe property within the jurisdiction of the court, and 
which would be affected by its decree, was only a part of its Une. Held 
that, under ail the circumstances, the court did not abuse its discrétion 
in denying leave to flle the supplemental bill. 

Appeal from the District Court of the United States for the East- 
ern Division of the Northern District of Ohio; John M. KilHts, 
Judge. 

Suit in equity by the General Investment Company against the Lake 
Shore & Michigan Southern Railway Company, the Central Trust 
Company of New York, the. New York Central & Hudson River Rail- 
road Company, William A, Read, Henry Evans, and Willis D. Wood. 
Decree for défendants, and complainant appeals. Modified. 

For opinion below, see 226 Fed. 976. 

F. A. Henry, of Cleveland, Ohio, for appellant. 

Doyle, Lewis, Lewis & Emery, of Toledo, Ohio (C. T. Lewis, of To- 
ledo, Ohio, Walter C. Noyés, of New York City, and Samuel H. West, 
of Cleveland, Ohio, of counsel), for appellees. 

Before WARRINGTON and KNAPPEN, Circuit Judges, and 
SANFORD, District Judge. 

SANFORD, District Judge. This suit was commenced by a péti- 
tion in equity filed in the Court of Common Pleas of Cuyahoga Coun- 
ty, Ohio, by the Central Investment Company, a Maine corporation, 
against The Lake Shore & Michigan Southern Railway Company, a 
corporation of New York, Pennsylvania, Ohio, Michigan, Indiana 
and Illinois (hereinafter called the Lake Shore Company), The New 
York Central & Hudson River Railroad Company, a New York cor- 
poration (hereinafter called the New York Central Company), the 
Central Trust Company of New York, and three individual défend- 
ants, Read, Evans and Wood, for the primary purpose of enjoining 
the consolidation of the Lake Shore and New York Central Compa- 
nies, with ofhers, into a single corporation. Summons was issued for 
the Lake Shore and New York Central Companies and returned as 
served upon each. No process was issued for the Trust Company or 
individual défendants; and they hâve never appeared herein. Before 

{gssFor other cases see same toplc & KEY-NUMBER in ail Key-Numbered Digests à Indexes 



GENERAL INV. CO. V. LAKE SHOEE & M. S. ET. CO. 163 

the return day the New York Central Company appeared specially 
and moved that the sheriff's return upon it be set aside. This motion 
was overruled; as was the plaintiff's motion for a temporary injunc- 
tion. 

Thereaf ter, the Lake Shore and New York Central Companies, 
with The New York Central Railroad Company (purporting to be the 
Consolidated railroad corporation created meanwhile imder the laws of 
New York, Pennsylvania, Ohio, Michigan, Indiana and Illinois), ap- 
peared specially and filed their pétition for the removal of the cause 
to the United States District Court below. This removal was ordered 
by the Common Pleas Court. 

After such removal, the New York Central Company, appearing 
specially in the District Court, moved to set aside the return of the 
the summons against it and quash the service. The Lake Shbre Com- 
pany also moved to dismiss the plaintiff's pétition. After a hearing on 
the motion of the New York Central Company it was adjudged that 
the sen'ice and summons against it be set aside, and that it go hence, 
with costs. Subsequently the plaintiff moved for leave to file a sup- 
plemental bill making new parties défendant; also for "substituted 
process" upon the New York Central Company and others. More than 
two months thereafter the plaintiff moved that the cause be remanded 
to the State court. This motion was denied. Subsequently a decree 
was entered denying the plaintiff's motion for substituted service, and 
leave to file a supplemental bill ; granting the Lake Shore Company's 
motion to dismiss ; and dismissing the suit at the plaintiff's costs ; f rom 
which final decree the plaintiff has appealed. 

[1] L Motion to remand. The pétition for removal, which alleged 
diversity of citizenship between the plaintiff and ail défendants and 
the requisite jurisdictional amount, was primarily based on a separable 
controversy with the removing défendants arising under the laws of 
the United States. The plaintiff, while not denying the gênerai grounds 
of Fédéral jurisdiction, insists that the suit was improperly removed 
to the District Court because of want of local jurisdiction in such 
court due to the fact that the New York Central Company was not 
an inhabitant of the district. 

It is unnecessary to détermine whether, under the rule of Ex parte 
Wisner, 203 U. S. 449, 27 Sup. Ct. 150, 51 L. Ed. 264, In re Moore, 
209 U. S. 491, 28 Sup. Ct. 585, 52 L. Ed. 904, 14 Aiin. Cas. 1164, Lou- 
isville Railroad v. Fisher (6th Cir.) 155 Fed. 68, 83 C. C. A. 584, U L. 
R. A. (N. S.) 926, Turk v. Illinois Central Railroad (6th Cir.) 218 Fed. 
315, 134 C. C. A. 111, and other similar cases, there was, in the first 
instance, a want of local jurisdiction in the court below. If gênerai 
Fédéral jurisdiction exists, the want of local jurisdiction or venue in 
the particular Fédéral court to which a cause has been removed, is 
waived, where the plaintiff, after the removal, without challenging such 
jurisdiction by motion to remand or otherwise, consents to and accepts 
such jurisdiction by affirmative acts in récognition therebf and sub- 
mission thereto. In re Moore, 209 U. S. supra, at page 496, 28 Sup. 
Ct. 585, 52 L. Ed. 904, 14 Ann. Cas. 1164; Western Loan Go. v. Min- 
ing Co., 210 U. S. 368, 371, 28 Sup. Ct. 720, 52 L. Ed. 1101 ; Kreigh 



164 250 FEDERAL RBPOKTER 

V. Westinghouse, 214 U. S. 249, 253, 29 Sup. Ct. 619, 53 L. Ed. 984; 
Louisville Railroad v. Fisher (6th Cir.) 155 Fed. supra, at page 69, 83 
C. C. A. 584, 11 L. R. A. (N. S.) 926; Garrett v. Louisville Railroad 
(6th Cir.) 197 Fed. 715, 117 C. C. A. 109. Such objection to the want 
of venue must be raised at the first opportunity calling for élection be- 
tween insisting on the objection or taking inconsistent action. Erie 
Railroad v. Kennedy (6th Cir.) 191 Fed. 332, 334, 112 C. C. A. 76. 

In the instant case, the plaintiff, after the removal, without anywise 
challenging the jurisdiction of the District Court, entered into an agree- 
ment as to using therein certain testimony relating to the vaHdity of 
the service upon the New York Central Company ; participated in the 
hearing therein on the motion to set aside such service ; and subse- 
quently, more than a month after such service had been set aside and 
while the Eake Shore Company's motion to dismiss vvas pending, filed 
therein its motion for leave to file a supplemental bill, and two motions 
for "substituted process" upon the New York Central Company and 
others, under section 57 of the Judicial Code fAct Mardi 3, 1911, c. 
231, 36 Stat. 1102 [Comp. St. 1916, § 1039]). Thèse several acts on its 
part were clear and unequivocal récognitions of the jurisdiction of the 
District Court, indicating its wilHngness that the matters in controversy 
should be tried by that court; its motions for leave to file a supple- 
mental pétition and for "substituted process" not merely tacitly con- 
senting to accept its jurisdiction, but afïirmatively appealing to its aid 
and invoking the exercise of such jurisdiction. In re Moore, 209 U. S. 
supra, at page 496, 28 Sup. Ct. 585, 706, 52 E. Ed. 904, 14 Ann. Cas. 
1164; Clark v. Southern Pacific Company (C. C.) 175 Fed. 122, 127. 
Such consent to the jurisdiction of the District Court and waiver of 
objection to its want of venue, if any originally existed, could not 
thereaf ter be revoked ; and the motion to remand, filed more than two 
months thereafter, was hence properly denied. In re Moore, 209 U. 
S. supra, 490, 28 Sup. Ct. 585, 706, 52 L. Ed. 904, 14 Ann. Cas. 1164; 
Clark V. Southern Pacific Co. (C. C.) 175 Fed. 122, supra. 

[2] 2. Service on the Nezv York Central Company. The sherifï of 
Cuyahoga County made return that he had served the summons on the 
New York Central Company upon "W. A. Barr, Regular Ticket Agent, 
in charge of the business of said company, the président or other offi- 
cer not found in my county." The motion of the New York Central 
Company to set aside this service, was based primarily upon the 
grounds that it had never done business in Ohio or become subject 
to service of process therein, and that Barr was not its agent or in 
charge of its business. 

[3] A foreign corporation is not amenable to personal process in 
a court of another state unless it is doing business in such state and 
such process is served upon an authorized officer or agent. Peterson 
V. Chicago Railway, 205 U. S. 364, 390, 394, 27 Sup. Ct. 513, 51 L. Ed. 
841; Mechanical Appliance Co. v. Castleman, 215 U. S. 437, 441, 30 
Sup. Ct. 125, 54 E. Ed. 272; Herndon-Carter Co. v. Norris, 224 U. S. 
496, 499, 32 Sup. Ct. 550, 56 E. Ed. 857; Philadelphia Railway v. Mc- 
Kibbin, 243 U. S. 264, 265, 37 Sup. Ct. 280, 61 E. Ed. 710; and cases 
therein cited. To render it so amenable there must be an actual doing 



GENERAL INV. CO. V. LAKE SHORE & M. S. RY. CO. 165 

of business within the state of such character and extent as to warrant 
the inference that it lias subjected itself to the jurisdiction and laws 
of such State and is there présent subject to the process of its courts. 
St. Louis Raihvay v. Alexander, 227 U. S. 218, 226, 227, 33 Sup. Ct. 
245, 57 L. Ed. 486, Ann. Cas. 191 5B, 77; International Harvester Co. 
V. Kentucky, 234 U. S. 579, 583, 586, 34 Sup. Ct. 944, 58 L. Ed. 1479 ; 
Washington-Virginia Railway v. Real Estate Trust, 238 U. S. 185, 
186, 35 Sup. Ct. 818, 59 L. Ed. 1262; Philadelphia Railway v. Mc- 
Kibbin, 243 U. S. supra, at page 266, 37 Sup. Ct. 280, 61 L. Ed. 710. 
The validity of the service of process in a state court may, furthermore, 
be questioned after reinoval to a Fédéral court ; the sheriff's return not 
being conclusive and the question of jurisdiction being one for the ul- 
timate détermination of the Fédéral court. Mechanical Appliance Co. 
V. Castleman, 215 U. S. supra, at 441, 442, 443, 30 Sup. Ct. 125, 54 L. 
Ed. 272, and cases therein cited. 

[4] The testimony established the foUowing material facts: The 
New York Central Company was a New York corporation. It had 
no line of railroad in Ohio and maintained no office or place of business 
therein. Both it and the Lake Shore Company were members of a 
group or System, comprising several railroad companies included un- 
der the gênerai désignation of the "New York Central Lines." Each 
of thèse several companies commonly marked its rolling stock and 
equipment with its own initiais and the words "New York Central 
Lines" ; issued its tickets on paper water marked with thèse words ; 
printed them on its time-tables; and generally used them as a trade 
mark on available matter. The same person was Président of the New 
York Central and Lake Shore Companies. The New York Central 
Company's railroad connected at Buffalo, New York, with that of the 
Lake Shore Company, forming a continuons line from New York 
City to Chicago, Illinois, extending through Cleveland, in Cuyahoga 
County, Ohio. Through passenger rates were, by agreement, estab- 
lished over thèse Connecting lines ; and passenger trains run over them 
from Cleveland and western points to New York City, without change 
of passenger cars. The Lake Shore Company maintained a city ticket 
office in Cleveland, on the door of which the words "New York Cen- 
tral Lines" were painted. It there sold coupon tickets for continuons 
passage over its line and those of the New York Central Company 
to points on the latter. Thèse tickets recited that they were issued by 
the Lake Shore Company and that in selling tickets for passage over 
other lines it acted only as agent. They bore at the top the name 
of the New York Central Company, for the purpose of validating 
them as authorized tickets issued by the Lake Shore Company on ac- 
count of the New York Central Company. Their date stamp read: 
"New York Central Lines (date of issuance) City Ticket Office, Cleve- 
land, O." They were honored by the New York Central Company 
for the transportation of passengers from Bufïalo to the points of des- 
tination ; and upon an accounting the New York Central Company re- 
ceived from the Lake Shore Company the proportionate part of the 
f ares collected for the transportation over its lines ; and so, recipro- 
cally, as to like tickets issued by the New York Central Company for 



166 250 fbdp;ral reporter 

transportation to points on the lines of the Lake Shore Company. The 
Lake Shore Company had also, by agreement with other railroad com- 
panies throughout the country not included in the "New York Central 
Lines," estaWished through passenger rates to varions points on the 
lines of such other companies, and regularly issued coupon tickets for 
continuons passage to such points, which were in ail respects similar 
to those issued for passage to points on the New York Central and 
other "New York Central Lines," bearing likewise the name of the 
company on whose line the point of destination was located, and were 
honored by thèse other companies and accounted and settled for in ex- 
actly the same manner. W. A. Barr was employed as City Ticket 
Agent of the Lake Shore Company in its Cleveland office. He was not 
in the employment of the New York Central Company, received no 
compensation f rom it, and did not report or account to it ; ail account- 
ing and settlements being made between the two companies. As such 
ticket agent, he regularly sold coupon tickets, as above described, for 
passage over the lines of the Lake Shore and of the New York Cen- 
tral Company and other companies not included in the "New York 
Central Lines." 

From thèse facts it appears that the New York Central Company it- 
self transacted no business in Ohio. The plaintiff's contention that it 
was nevertheless engaged in business. therein, through the agency of 
the Lake Shore Company as an affiliated meniber of the "New York 
Central Lines" and in the sale of tickets in its behalf, and that Barr 
thereby became its agent for the service of process, is directly ruled by 
Peterson v. Chicago Railway, 205 U. S. supra, at page 394, 27 Sup. Ct. 
513, 51 L. Ed. 841, which, in its essential facts, is almost identical with 
the instant case. There a domestic and a foreign railroad corpora- 
tion, owning lines of railroad which connected at the State line, were 
associated as constituent éléments of the "Rock Island System," adver- 
tised as such in their time-tables and elsewhere. The foreign cor- 
poration owned the majority of the stock in the domestic corporation, 
with the power of controlling its management through the élection of 
directors and officers. The domestic corporation, however, transacted 
its business within the state as a separate légal entity, under the con- 
trol and management of its own officers and agents. And, although 
the two companies had to a certain extent common agents and em- 
ployées, their control and payment was kept distinct while engaged in 
the separate service of each. It was held, under thèse circumstances, 
that the foreign corporation was not, in the purview of the law, doing 
business within the State, either through the agency of the domestic 
corporation or otherwise ; that a ticket agent employed by the domes- 
tic corporation in selling tickets good upon its own line and that of the 
foreign corporation, transacted such business as the agent of the do- 
mestic corporation merely; and that an attempted service of process 
upon such ticket agent was not a service upon an agent of the foreign 
corporation transacting its business within the State in such sensé as 
to give jurisdiction over it. 

The doctrine of this case was recently re-affirmed and emphasized 
in Philadelphia Railway v. McKibbin, 243 U. S. supra, at page 268, 37 



GENERAL INV. CO. V. LAKE 8HOKB & M. S. RY. CO. 167 

Sup. Ct. 280, 61 L. Ed. 710, in which it was held that the sale by a local 
carrier within a State of through tickets over the line of a foreign 
Connecting carrier did not involve a doing of business within the State 
by such Connecting carrier, otherwise, "nearly every carrier in the 
country would he 'doing business' in every State" ; and that even if the 
défendants' "subsidiary companies" did business within the State, this 
would not, under the authority of the Peterson case, warrant a finding 
that it did business there. 

The case of St. Louis Railway v. Alexander, 227 U. S. supra, at 
page 228, 33 Sup. Ct. 245, 57 h. Ed. 486, Ann. Cas. 191 5B, 77, upon 
wliich the plaintiff mainly relies, is essentially difïerent from the in- 
stant case. There two foreign railroad corporations, whose lines were 
combined together as a continuons line under the désignation of the 
"Cotton Belt Route," maintained in the State in which suit was brought 
against one of the constituent corporations, a joint office of the "Cot- 
ton Belt Route" and of both constituent lines, with a joint freight 
agent of the two lines, who, as the authorized agent of the défendant, 
attended to the settlement of claims against it and presumably other 
matters of a kindred character, undertaking to act for and represent it, 
and negotiating directly for and in its behalf ; a situation which was 
held to constitute a transaction of business in behalf of the défendant 
by its authorized agent in such manner as to bring it within the State 
and make it subject to the service of process. Hère, however, the 
essential élément of an authorized résident agent, directly acting for 
and representing the défendant in the conduct of its business, is en- 
tirely lacking. 

We hence necessarily conclude, under the foregoing authorities, that 
the New York Central Company was not, in the purview of the law, 
doing business in Ohio ; that the service of the summons upon Barr 
was not upon an agent transacting its business therein in such sensé as 
to give jurisdiction over it; and that the court below correctly set 
aside such service and summons and adjudged that it go hence. 

We therefore need not consider the alternative contention of the 
New York Central Company, that in any event the service upon Barr 
was invalid, under section 11288 of the General Code of Ohio, be- 
cause not made upon him in a coun'.y in which its railroad was located 
or through which it passed. 

3. Appearance by the New York Central Company. Eour months 
after the service on the New York Central Company had been set aside, 
and before the détermination of the Lake Shore Company's motion to 
dismiss, the plaintiff filed its motion to remand to the state court. It 
now insists in this court (evidently for the first time), that a certain 
brief, which appears in the transcript without explanatory évidence, 
but was apparently submitted in the court below in opposition to this 
motion, was submitted by counsel in behalf of the New York Central 
Company as one of the co-defendants, and constituted a voluntary ap- 
pearance by it. This brief dealt with motions to remand the présent 
case and another case in which the Lake Shore Company, but not the 
New York Central Company, was a défendant, and was entitled in 
both cases. It was signed as "Solicitors for Défendants" by the coun- 



168 250 FEDERAL EBPORTEll 

sel who had previously représentée! the New York Central Company 
on its motion to set aside the service ; who then represented the L,ake 
Shore Company in opposition to the motion to remand, and aiso, it 
appears, on its pending motion to dismiss the présent case. In discuss- 
ing the right to remove the présent case before service of process upon 
ail défendants, it was stated that both at the time of fîling the péti- 
tion for removal and then, the I_,ake Shore and New York Central 
Companies "were and are the only défendants in the suit." On the 
other hand, it was elsewhere distinctly stated that the court had indi- 
cated by its previous order that the New York Central Company was 
never legally a défendant "and is not now a défendant in the action," 
which "now stands as one brought against the Lake Shore alone" ; 
in the concluding summary it was repeated that "the L,ake Shore is 
now the only real or actual défendant in both cases" ; and in the last 
sentence, it was urged, not only that the motion to remand should 
be overruled, but that, for the reasons set forth in their former brief , 
the motion of the L,ake Shore Company to dismiss this case (which 
was based primarily upon the absence of the New York Central Com- 
pany as an indispensable party), should be granted. 

Viewing this brief in its entirety, in the light of the existing situation 
and of its manifest purposes, we think the reasonable inference is that 
it was submitted by thèse solicitors in behalf of the Lake Shore Com- 
pany alone, the only défendant then before the court, and not submit- 
ted, or intended to be, in behalf of the New York Central Company, 
thereby not merely reinstating it as a défendant, after succeeding, four 
months before, by a vigorous contest, in obtaining its dismissal, but 
also destroying the principal ground of the Lake Shore Company's 
motion to dismiss, upon which they were then insisting; the plural 
word "Défendants" with which it was signed having been used, it 
would seem, either through inadvertence or typographical error, or as 
indicating their représentation of the Lake Shore Company as the de- 
fendant in the two cases. We hence conclude that it did not constitute 
a voluntary entry of appearance by the New York Central Company 
herein. 

4. Dismissal of original pétition. The original pétition was filed De- 
cember 8, 1914. Its broad allégations, so far as now material, may be 
thus summarized : The plaintifif had been the owner, since June 27, 
1914, of 5 shares of $100 each of the capital stock of the Lake Shore 
Company, out of a total outstanding issue of 499,961 shares; and, 
since February 24, 1914, of 300 like shares of the capital stock of the 
New York Central Company, out of a total of 2,555,810.66 shares. 
The Lake Shore Company, had, for many years, owned a majority or 
ail of the capital stock of various other railroad and transportation 
companies incorporated under the laws of New York, Pennsylvania, 
Ohio, Indiana and Illinois. The New York Central Company had, for 
many years, owned, in violation of law, a majority, namely 452,892 
shares, of the capital stock of the Lake Shore Company; and a ma- 
jority or ail of the capital stock of other railroad and transportation 
companies incorporated under the laws of Michigan and New York. 
The several subsidiary companies whose controlling' stock was thus 



GENERAL INV. CO, V. LAKE SHOEE & M. S. RY. CO. 169 

held by the Lake Shore and New York Central Companies owned vari- 
ons lines which were parallel and naturally competing with those of the 
Lake Shore, New York Central and other subsidiary companies, in lo- 
cal, Interstate and foreign commerce. Their control had been acquired 
in order to restrain such commerce and suppress compétition therein, 
and had accomplished such purpose ; and if the Lake Shore Company 
continued its holding of the controlling stock in its subsidiary compa- 
nies its property and corporate entity would be subjected to penalties 
and forfeitures under various provisions of law. The New York Cen- 
tral Company, through its own stock ownership and that of the Lake 
Shore Company and by the élection of directors, dominated and con- 
trolled, directly and indirectly, the affairs and management of the Lake 
Shore Company and of each of their several subsidiary companies ; 
thereby concentrating such control in one ownership. To further per- 
fect this combination it had deposited its stock in the Lake Shore Com- 
pany tO' secure an issue of its collatéral trust bonds, under an inden- 
ture contemplating the consolidation of the two companies, and had 
executed a mortgage securing an issue of its consolidation bonds to be 
used in retiring such collatéral trust bonds. And as a final step in il- 
legally consoliclating the Lake Shore and New York Central Compa- 
nies, the boards of directors of the New York Central and Lake Shore 
Companies and of their subsidiary companies had recently signed a 
proposed agreement of consolidation (the date of which was not recit- 
ed), contemplating a merger of ail of such companies. By its terms 
thèse several companies were to be Consolidated in a single corporation, 
styled The New York Central Railroad Company, having a capital 
stock of 3,000,000 shares of $100 each, the majority of which was to 
be issued in exchange for stock in the consoliclating companies; the 
stock held by the New York Central Company in the Lake Shore Com- 
pany was to be cancelled ; the minority stockholders in the Lake Shore 
Company were to receive for each of their shares five shares in the 
Consolidated corporation, aggregating 235,445 shares ; and the Lake 
Shore collatéral trust bonds were to be exchanged for equal amounts 
of the consolidation bonds of the New York Central Company. This 
proposed consolidation of companies owning parallel and competing 
lines of railroad was a violation of the Fédéral Anti-Trust Act and of 
various provisions of the constitutions and laws of the several states, 
and otherwise illégal ; and if approved by the stockholders of the sev- 
eral companies inextricable confusion would resuit, a multiplicity of 
annulment suits would be required, and penalties and forfeitures would 
arise against the companies. At a meeting of the stockholders of the 
New York Central Company, held July 20, 1914, the consolidation had 
been approved by a vote of two-thirds of the outstanding stock ; the 
plaintiff having voted and protested against it. A meeting of the stock- 
holders of the Lake Shore Company had been called for December 22, 
1914 (two weeks after the filing of the pétition), and the New York 
Central Company would, unless restrained, vote its controlling stock 
in the Lake Shore Company in favor of the consolidation. After this 
meeting had been called the défendants Read, Evans and Wood, act- 
ing as a committee for minority stockholders in the Lake Shore Com- 



170 250 FEDERAL REPOHTEB 

pany, had instituted Htigation to' enjoin the proposed consolidation ; 
whereupon such litigation had been settled and dismissed and the Lake 
Shore Company had entered into an illégal agreement with the com- 
mittee and the Central Trust Company by which the committee was to 
deposit with the Trust Company minority stock for which the Lake 
Shore Company was to pay $500 per share, and an additional sum of 
$200,000. 

Theplaintiiï filed its pétition in behalf of itself and ail other simi- 
larly situated stockholders in the Lake Shore Company joining there- 
in, and, alleging that it had no adéquate remedy at law, prayed : that 
the New York Central Company be enjoined from voting its stock in 
the Lake Shore Company in favor of the consolidation agreement, or 
otherwise, and the Lake Shore Company enjoined from counting such 
stock or permitting it to be voted ; that the Lake Shore Company be 
enjoined from entering into the proposed agreement and consolida- 
tion, and from making any consolidation whatever with the New York 
Central Company unless both were divested of their control of sub- 
sidiary companies; that the Lake Shore Company be enjoined from 
purchasing its stock from the Read Committee, and any acquisition 
thereof decreed illégal and void; that receivers be appointed of the 
stock owned by the Lake Shore Company in its several subsidiary com- 
panies, and the same placed in the hands of independent trustées or 
sold, or their compétitive management otherwise assured ; that a re- 
ceiver be appointed of the equity of the New York Central Company 
in the stock of the Lake Shore Company, and the same placed in the 
hands of independent trustées to be managed in the interest of the 
Lake Shore Company in compétition with ail other lines ; that the New 
York Central Company be enjoined from issuing its consolidation 
bonds in exchange for Lake Shore collatéral trust bonds ; that if, 
pending the action, the proposed consolidation should be effected, the 
same be set aside; and for gênerai relief. 

The motion of the Lake Shore Company to dismiss, which was di- 
rected to the entire pétition, was based primarily upon the ground that 
the New York Central Company was an indispensable party, material- 
ly interested in the relief prayed, whose rights were so involved that 
a détermination of the cause without its appearance would be incon- 
sistent with equity ; also, in gênerai terms, upon want of equity on the 
face of the pétition, and adequacy of remedy at law. 

[5] (1) It is a gênerai rule in equity that ail persons materially in^ 
terested, either legally or beneficially, in the subject matter of a suit, 
are to be made parties to it ; that the court may be enabled to make a 
complète decree, prevent future litigation, and make it certain that no 
injustice is done, either to the parties before it or to others interested 
in the subject matter, by a decree granted upon a partial view of the 
real merits. Gregory v. Stetson, 133 U. S. 579, 586, 10 Sup. Ct. 422, 
33 L. Ed. 792; Minnesota v. Northern Securities Co., 184 U. S. 199, 
235, 22 Sup. Ct. 308, 46 L. Ed. 499; Story's Eq. Plead. § 72. No court 
can adjudicate directly upon the rights of a person who is not actually 
or constructively before it. Mallow v. Hinde, 12 Wheat. 193, 198, 6 
L. Ed. 599; Shields v. Barrow, 17 How. 129, 140, 15 L. Ed. 158; 



GENERAL INV. CO. V. LAKE SHOKE & M. S. RY. CO. 171 

Gregory v. Stetson, 133 U. S. supra, at page 586, 10 Sup. Ct. 422, 33 
L. Ed. 792 ; Taylor v. Southern Pacific Co. (C. C.) 122 Fed. 147, 152 
(Lurton, Circuit Judge). Nor can it make a decree between the par- 
ties before it which necessarily affects the rights of an absent person ; 
who is, in such case, an indispensable party. Shields v. Barrow, 17 
How. supra, at page 141, 15 L. Ed. 158; Barney v. Baltimore City, 6 
Wall. 280, 284, 18 L. Ed. 825 ; Gregory v. Stetson, 133 U. S. supra, 
at page 587, 10 Sup. Ct. 422, 33 L. Ed. 792; New Orléans Water 
Works V. New Orléans, 164 U. S. 471, 489, 17 Sup. Ct. 161, 41 L. Ed. 
518; Waterman v. Bank Co., 216 U. S. 33, 48, 30 Sup. Ct. 10, 54- L. 
Ed. 80. And it is hence the established practice of courts of equity to 
dismiss a bill, even sua sponte, if it appears that to grant the relief 
prayed would injuriously afifect persons materially interested in the 
subject matter who are not parties to the suit. Minnesota v. Northern 
Securities Co., 184 U. S. supra, at page 235, 22 Sup. Ct. 308, 46 L. Ed. 
499. 

A bill is not, however, to be dismissed in its entirety because of the 
absence of a person who is indispensable to granting ail the relief 
prayed, if there is any separable matter as to which complète relief may 
be given, not afïecting the rights of such absent person. New Orléans 
Water Works v. New Orléans, 164 U. S. supra, at page 480, 17 Sup. 
Ct. 161, 41 L. Ed. 518 (inferentiâlly) ; Waterman v. Bank Co., 215 U. 
S. supra, at page 49, 30 Sup. Ct. 10, 54 L. Ed. 80; Davis v. Davis 
(C. C.) 89 Fed. 532, 538. And see : Judicial Code, § 50 (f ormerly R. 
S. § 737 [Comp. St. 1916, §■ 1032]); Cole Mining Co. v. Water Co., 1 
Sawy. 470, 6 Fed. Cas. 67, and Cole Mining Co. v. Water Co., 1 Sawy. 
685, 6 Fed. Cas. 72. 

[6] Applying thèse principles to the instant case, it is clear that the 
New York Central Company was an indispensable party to granting 
so much of the relief prayed as sought to enjoin it from voting its stock 
in the Lake Shore Company, and, in efifect the same thing, to enjoin the 
Lake Shore Company from counting such stock or permitting it to be 
voted; to appoint a receiver of its equity in such stock and direct the 
disposition and management thereof ; and to enjoin it from issuing its 
consolidation bonds in exchange for Lake Shore collatéral trust bonds : 
the relief sought as to each of thèse matters being of a character which, 
necessarily, would directly affect its rights and property interests, and 
hence under the well settled rules above stated, could not be granted 
by the court in its absence. A stockholder in a corporation is an in- 
dispensable party to a suit seeking to enjoin him from voting his stock 
at a stockholders' meeting. Taylor v. Southern Pacific Co. (C. C.) 122 
Fed. supra, at page 152. 

The Read Committee, if not the Trust Company also, were, further- 
more, indispensable parties to granting so much of the relief prayed as 
sought to enjoin the Lake Shore Company from carrying out its agree- 
ment with them for the purchase of its stock and to set aside any ac- 
quisition thereof. Gregory v. Stetson, 133 U. S. supra, at page 585, 
10 Sup. Ct. 422, 33 L. Ed. 792; New Orléans Water Works v. New 
Orléans, 164 U. S. supra, at page 479, 17 Sup. Ct. 161, 41 L. Ed. 518; 
Lengel v. SmeUing Co. (C. C.) 110 Fed. 19, 22. 



172 250 FEDERAL EErORÏEU 

[7] The New York Central Company was net, however, an indis- 
pensable party to so much of the pétition as sought to enjoin the Lake 
Shore Company itself f rom entering into the proposée! consolidation ; 
which was alleged to be illégal under varions provisions of law, entire- 
ly independent of the ownership and voting of the controlling stock 
held by the New 'York Central Company. In a suit by a stockholder to 
enjoin a corporation in which he holds stock from entering into an il- 
légal merger with another corporation, such other corporation need not 
be made a party; its interest being entirely remote. Blatchford v. 
Ross, 54 Barb. (N. Y.) 42, 47. When the original pétition was filed the 
consolidation agreement had not been made eiïective by vote of the 
stockholders of the Lake Shore Company, as required by section 9028 
of the General Code of Ohio. Therefore the New York Central Com- 
pany had acquired no vested contract right in the proposed consolida- 
tion; and its mère expectancy that the Lake Shore Company would 
enter into such agreement was a wholly prospective interest, of a re- 
mote and non- justiciable character, which did not entitle it to be heard, 
in the capacity of a contracting party, in litigation seeking to enjoin the 
Lake Shore Company from entering on its own account, into such con- 
solidation, or render it an indispensable party thereto. Nor was it in- 
dispensable to such litigation in its capacity as a stockholder in the 
Lake Shore Company ; that company itself under the well settled gên- 
erai rule, representing its individual stockholders in the défense of 
suits involving its corporate rights and functions. Taylor v. Southern 
Pacific Co. (C. C.) 122 Fed. supra, at page 153. And see Blatchford v. 
Ross, 54 Barb. (N. Y.) supra, at page 48. 

[8] So too the New York Central Company was not an indispensa- 
ble party to so much of the pétition as sought the appointment of a re- 
ceiver of the stocks held by the Lake Shore Company in its subsidiary 
companies, and decreeë for their disposition and management; the 
indirect interest of the New York Central Company in thèse matters 
as a stockholder in the Lake Shore Company being likewise represented 
by that Company. 

[9] The motion to dismiss was, however, directed to the entire pé- 
tition. It was formerly an established rule of equity practice that a de- 
murrer to an entire bill must fail if any part of the bill was good 
against it, although if limited to the defective parts of the bill it would 
hâve been sustained. Livingston v. Story, 9 Pet. 632, 658, 9 L. Ed. 
255 ; Buffington v. Harvey, 5 Otto, 99, 100, 24 L. Ed. 381 ; Marshall 
V. Vicksburg, 15 Wall. 146, 149, 21 L. Ed. 121 ; Pacific Railroad v. 
Missouri Railroad, 111 U. S. 505, 520, 4 Sup. Ct. 583, 28 L. Ed. 498; 
Stewart v. Masterson, 131 U. S. 151, 158, 9 Sup. Ct. 682, 33 L. Ed. 
114; Duckworth v. Appostahs (D. C.) 208 Fed. 936, 937. And since 
the promulgation of equity rule 29 (198 Fed. xxvi, 115 C. C. A. xxvi) 
abolishing demurrers to bills in equity and substituting therefor mo- 
tions to dismiss, it necessarily follows that such motions are to be gov- 
erned by a like rule of practice. Applying this rule, we are of opinion 
that as the pétition included matters as to which the New York Central 
Company was not an indispensable party, the trial court was in error 
in granting, on the ground of its absence, the broad motion to dismiss 



GENERAL INV. CO. V. LAKE SHOKB & M. S. BY. CO. 173 

the entire original pétition. Since, however, the court might properly 
hâve dismissed, sua sponte , for want of indispensable parties, so much 
of the original pétition as related to enjoining the New York Central 
Company from voting its stock in the Lake Shore Company, appoint- 
ing a receiver of its equity therein, directing the disposition and man- 
agement thereof, enjoining it from issuing its consolidation bonds in 
exchange for Lake Shore collatéral trust bonds, and so much as re- 
lated to enjoining the Lake Shore Company from counting such stock 
or permitting it to be voted and from carrying out its agreement with 
the Read Committee in référence to the purchase of stock and setting 
aside the acquisition thereof, we find — independently of the question of 
whether "substituted service" should bave been granted upon the New 
York Central Company, which will be hereinafter considered — no er- 
ror in so much of the decree of dismissal as related to thèse portions 
of the original pétition : except that, such dismissal being for lack of 
indispensable parties and not touching the merits, the decree of dismiss- 
al should be modified so as to be without préjudice. Swan Land Co. 
V. Frank, 148 U. S. 603, 612, 13 Sup. Ct. 691, 37 L. Ed. 577; Hyams 
V. Old Dominion Co., 209 Fed. 808, 811, 126 C. C. A. 532. 

Since, however, the New York Central Company was not an indis- 
pensable party to so much of the original pétition as sought an injunc- 
tion against the Lake Shore Company from entering into the consoli- 
dation, the appointment of a receiver of the stocks owned by it in its 
subsidiary companies, and decrees for their management and disposi- 
tion, it foUows that in so far as the decree o£ dismissal related to those 
matters and awarded ail unadjudged costs against the plaintiff, it was 
not warranted merely on account of the absence of that Company, and, 
unless sustainable upon other grounds, must be reversed. 

(2) As to varions reasons urged by the défendants in argument as 
grounds upon which the original pétition should hâve been dismissed 
for want of equity, our conclusions are : 

[10, 11] (a) As the pétition did not disclose the dates upon which 
the consolidation agreement had been signed by the boards of directors 
of the varions companies, it did not appear therefrom that the plain- 
tiff had bought its stock in the Lake Shore Company af ter such agree- 
ment had been signed by its directors and in contemplation of the con- 
solidation. In this respect the instant case differs from Continental 
Securities Co. v. Interhorough Co. (D. C.) 207 Fed. 467, 470, which 
was determined after proof, at final hearing. (b) It did not appear 
from the face of the pétition that the plaintiff had bought such stock 
merely for the purpose of instituting litigation and compelling the 
défendants to buy their peace. (c) The amount of such stock, namely 
fîve shares, was not so inconsiderable and trifling in value that the 
plaintiff should, on that ground, be denied such équitable relief as it 
might otherwise be entitled, as matter of right, to receive : especially 
as its pétition was also filed in behalf of other stockholders similarly 
situated, some of whom, if the suit had been proceeded with, might, for 
aught then appearing, hâve joined and shared its benefits. In this re- 
spect also the instant case differs from Continental Securities Co. v. 
Interborough Co. (D. C.) 207 Fed. supra, 467, in which a single stock- 



174 250 FEDERAL KEPOKTEE 

holder stood bef ore the court as plaintiff at the final hearîng ; and now 
more nearly présents the situation in that case as originally decided 
upon demurrer. Continental Securities Co. v. Interborough Co. (C. C.) 
165 Fed. 945, 956. And see, generally, as to the right of a single stock- 
holder to interpose for the prévention of an ultra vires and illégal act 
by the corporation in which he is a stockholder: 2 Cook on Corpo- 
rations (7th Ed.) § 669, p. 2152; and cases therein cited. (d) Nor is 
relief to be denied on the ground that the allégations of the original 
pétition did not comply with the requirements of equity rule 27 (198 
Fed. XXV, 115 C. C. A. xxv) as to-bills brought by stockholders against 
a corporation. This rule relates only to suits "founded on rights which 
may properly be asserted by the corporation," in which the stockhold- 
ers' rights are indirect and derivative merely, and has no application 
to a suit brought by a stockholder against the corporation seeking, in 
his own direct right, to enjoin it from doing an illégal act. See, in- 
ferentially: Dickinson v. Traction Co. (C. C.) 114 Fed. 232, 242. It 
is hence unnecessary to détermine whether the pétition sufficiently com- 
plied with the provisions of this rule ; or whether, in any event, this 
rule refers merely to suits commenced in the Fédéral courts, or applies 
as well to suits removed from state courts ; a question upon which 
there is a conflict of opinion. See Hopkins' Fed. Eq. Rules, 149; and 
cases therein cited. 

Furthermore, while we are not unmindful that, since the hearing in 
this court, it was decided in Paine Lumber Co. v. Neal, 244 U. S. 459, 
471, 37 Sup. Ct. 718, 61 L. Ed. 1256, that a private person could not 
maintain a suit to enjoin a violation of the Fédéral Anti-Trust Act 
(Act July 2, 1890, c. 647, 26 Stat. 209), under the provisions of its 
fourth section, it is clear, as a rule of pleading, under the authorities 
hereinabove cited, that the broad motion to dismiss the entire pétition 
for want of equity would not hâve been properly grantable, upon this 
ground, as to so much of the pétition alone as sought to enjoin the pro- 
posed consolidation on account of violation of this act. 

[12] (3) It is further urged that the motion to dismiss should hâve 
been granted, for adequacy of remedy at law, by reason of the fact that 
section 9034 of the Ohio General Code provides that a stockholder who 
refuses to couvert his stock into that of a consohdated company shall 
be paid the highest market value thereof during the two years preced- 
ing the making of the agreement for the consolidation by the directors, 
if he had previously so required. This statute, whose prime purpose 
was evidently to provide just compensation to a stockholder dissent- 
ing from a consolidation lawfully made, does not, in our opinion, pro- 
vide an adéquate remedy for a stockholder who seeks in advance to 
restrain the corporation from entering into an illégal consolidation. 
Furthermore this ground of the motion likewise could not, in any event, 
apply to the entire pétition, 

[13] 5. Denying leave to ûle supplemental Mil. The material allé- 
gations in the supplemental bill which the plaintiff moved for leave io 
file, may be thus summarized : The stockholders of the Eake Shore 
Company had, af ter the filing of the original pétition, held, on Decem- 
ber 22, 1914, the meeting to consider the agreement of consolidation. 



GENERAL INV. CO. V. LAKE SHOEE & M. S. EY. CO. 175 

dated April 29, 1914. At such meeting the consolidation agreement 
had been approved, over the protest of the plaintiff and other minonty 
stockholders ; 459,379 out of 459,461 shares, including the 452,892 
shares held by the New York Central Company and illegally voted by 
it, voting therefor. Pursuant thereto, the consolidation agreement 
had been executed by the ofhcers of the several consolidating compa- 
nies ; the organization of the new corporation, the New York Central 
Railroad Company (hereinafter called the Consolidated Company), 
resulting therefrom, had been perf ected ; and it then claimed to be 
a Consolidated railroad company organized under the laws of New 
York, Pennsylvania, Ohio, Indiana, Michigan and Illinois. The con- 
solidation agreement had been filed in the office of the Secretary of 
State of Ohio, thereby pretending to transfer ail the property of the 
Lake Shore Company in the northern district of Ohio to the Consol- 
idated Company, which then illegally possessed and claimed, as suc- 
cessor in title, ail of the property of the Lake Shore Company situated 
in the district, consisting of its line of railroad, with the real and Per- 
sonal property appurtenant, extending from the Pennsylvania line 
through Cuyahoga and other counties in Ohio. Pending the suit and 
pursuant to the consolidation agreement, the Consolidated Company 
had executed to trustées two mortgages covering the real and personal 
property of the Lake Shore Company, to secure certain issues of bonds 
from which the Lake Shore Company had received no benefit, thereby 
pretending to create liens upon the real and personal property of the 
Lake Shore Company within the district, to an arnount exceeding 
$365,000,000.00; and had also executed to a trustée an indenture pur- 
porting to constitute a charge upon ail the earnings and profits of the 
Lake Shore Company. The ofiicers of the several consolidating com- 
panies, including the New York Central and Lake Shore Companies, 
claimed that by reason of the consolidation the corporate existence o£ 
thèse companies had been merged in that of the Consolidated Com- 
pany; that their officers were fimcti oMcio; and that the title to ail of 
their property had passed to it. The nine railroad companies entering 
înto the consolidation with the New York Central and Lake Shore 
Companies and the trustées under said mortgages and indentures were 
citizens of other states than Maine. The consolidation agreement and 
ail proceedings and instruments therein set forth, were illégal and void 
for the reasons set forth in the original pétition, but constituted an 
apparent incumbrance and cloud upon the title to the property of the 
Lake Shore Company within the district. Wherefore the plaintifï 
prayed ; that the Consolidated Company, as a de facto corporation, the 
nine other railroad companies embraced in the consolidation, and the 
trustées under the mortgages and indenture executed by the Consol- 
idated Company, be made parties défendant; that, on behalf of the 
Lake Shore Company, its lawful right and claim to its property within 
the district be enforced, its title thereto quieted as against the claims 
of the défendants, and the cloud upon such title created by the con- 
solidation and proceedings in pursuance thereof, removed; that the 
Consolidated Company be ousted from its possession and claim of title 
thereto and required to restore the same to the Shore Company; that 



176 250 FEDEEAL EEPORTEU 

the mortgages executed by the Consolidated Company be decreed to 
be void as to such property ; and for process and gênerai relief. 

This supplemental bill related solely to the matter of the consolida- 
tion and was framed upon the theory that the consolidation and sub- 
séquent proceedings in pursuance thereof, including the mortgages 
executed by the Consolidated Company, constituted a cloud upon the 
title to the property of the Lake Shore Company within the district, 
which the plaintifï, as a stockholder, on its behalf and in its right, 
sought to hâve removed. 

(1) There was, however, no allégation that any of the nine consoli- 
dating companies which it was sought to make défendants, claimed, 
either before or after the consolidation, any right, title or interest in 
the properties of the Lake Shore Company within the district. On 
the contrary, it was specifically alleged that the officers of ail the con- 
solidating companies, including the New York Central Company, claim- 
ed that the title to the properties of the several constituent companies 
had been vested in the Consolidated Company. And this was admit- 
tedly the efïect of the consolidation, if valid, under the provisions of 
the Ohio General Code. Clearly, therefore, the supplemental bill, 
which lacked either allégation that any of thèse companies asserted 
any claim or title to the property in question or prayer for relief 
against them, presented no ground whatever for making them parties 
or permitting the supplemental bill to be filed against them. 

(2) As to the Consolidated Company and mortgage trustées, a more 
difiîcult question, however, arises. The défendants earnestly insist that 
the supplemental bill could not be properly filed because it sought to 
change the nature of the action from one in personam to one to remove 
cloud from title to property. Equity Rule 34 (198 Fed. xxviii, ILS 
C. C. A. xxviii) provides, however, that upon application of either 
party, the court may, upon just terms, permit him to file "a supple- 
mental pleading, alleging material facts occurring after his former 
pleading." And if the piaintiff's original bill is sufhcient to entitle him 
to one kind of reHef, and facts subsequently occur to entitle him to 
other and more extensive relief, he may hâve such relief by setting out 
the new matter in the form of a supplemental bill. Candler v. Pettit, 1 
Paige Ch. (N. Y.) 168, 19 Am. Dec. 399; Sheffield Iron Co. v. New- 
man_(5th Cir.) 77 Fed. 787, 791, 23 C. C. A. 459. Hère the original 
pétition had sought to prevent the Lake Shore Company from entering 
into the consolidation at a time when only an action in personam would 
lie, and had prayed that if pending the action such consolidation were 
effected, it should be set aside. And the consolidation having been 
thereafter effected, pending the action, we hence do not regard it as 
an insuperable objection to the fiiing of a supplemental bill seeking to 
set it aside, that the nature of the action would, in effect, be thereby 
changed. 

[14, 15] (3) It is also urged as an objection to the supplemental bill 
that it appeared from its allégations that neither the plaintiff nor the 
Lake Shore Company was in possession of the property from which it 
was sought to remove the cloud, but that the same was in possession of 
the ■ Consolidated Company. Plovvever, the gênerai equity rule that 



GENERAL INV. CO. V. LAKE SHORB & M. S. EY. CO. 177 

a bill to remove cloud from title can only be filed by one in possession, 
is based upon the ground that the plaintiff ordinarily bas an adéquate 
remedy at law by suit in ejectment, and does not prevent the main- 
tenance of such bill by one not in possession where there are other 
grounds of équitable relief. United States v. Wilson, 118 U. S. 86, 
89, 6 Sup. Ct. 991, 30 L. Ed. 110; American Association v. Williams 
(6th Cir.) 166 Fed. 17, 21, 93 C. C. A. 1 ; Butterfield v. Miller (6th 
Cir.) 195 Fed. 200, 202, 115 C. C. A. 152. And since in the situation 
disclosed by the supplemental bill, the plaintiff could only proceed in 
equity, by asserting derivatively, as a stockholder, the right in the 
Lake Shore Company to bave the cloud from its title removed, this 
being a recognized ground of équitable jurisdiction, we conclude that 
the mère lack of possession in either the plaintiff or the L,ake Shore 
Company was not of itself fatal to the plaintiff's right to maintain the 
supplemental bill. This conclusion is strengthened by the holding in 
Citizens Savings Bank v. Illinois Central Railroad, 205 U. S. supra, 
46, 27 Sup. Ct. 425, 51 L. Ed. 703, that a suit brought by owners of 
stock of a railroad company for the cancellation of deeds and leases 
under which its properties were held and managed by another corpo- 
ration and in its possession, was a suit of which the Fédéral Court had 
jurisdiction under section 8 of the Act of March 3, 1875 (now section 
57 of the Judicial Code), as one to remove an incumbrance or cloud 
upon property within the district; although it is to be noted that this 
case was determined purely upon the question of jurisdiction, and that 
the court stated (at pages 58 and 59) that in the absence of a demurrer 
or motion to dismiss for want of equity, it expressed no opinion upon 
the question whether, upon the showing made by the bill, the plaintiff 
was entitled to a decree giving it the relief asked. 

(4) Passing, without détermination, the question whether the sup- 
plemental bill substantially complied with the requirements of Equity 
Rule 27, as a stockholders' bill asserting derivatively a vested right in 
the Eake Shore Company, we reach the underlying question whether 
in any event the action of the District Court in refusing leave to file 
it, is, in view of the entire record, reviewable by this court. 

[16] The granting or refusing of leave to file a supplemental bill 
rests in the discrétion of the trial court ; and is not reviewable by an 
appellate court unless there bas been a gross abuse of such discrétion. 
Berliner Gramaphone Co. v. Seaman (4th Cir.) 113 Fed. 750, 754, 51 
C. C. A. 4-40, and cases therein cited. And see Gooch v. Presbyterian 
Hospital (6th Cir.) 239 Fed. 828, 830, 152 C. C. A. 614. 

And, obviously, many matters which would not bave constituted such 
want of equity as to prevent the maintenance of an original bill whose 
filing was a matter of right, are nevertheless circumstances to be prop- 
erly considered in determining whether, as a matter of sound judicial 
discrétion, leave should bave been granted to file a supplemental bill 
as a matter of grâce. See Continental Securities Co. v. Interborough 
Co. (D. C.) 207 Fed. supra, at page 472. 

[17] The record disclosed the folio wing facts: The plaintiff own- 
ed only 5 shares of the stock of the Lake Shore Company, out of a 
total outstanding issue of 499,961 shares. It had acquired this stock 
250 F.— 12 



178 250 FEDERAL EEPORTEB 

June 27, 1914, that is, more than two months after April 29, 1914, 
the date of the consolidation agreement ; and, it is f airly inferable, 
after such agreement had been entered into by the directors of the 
several companies. At the meeting of the stockholders of the Lake 
Shore Company only 77 other shares of stock had joined vvith it in 
voting against the consohdation. None of thèse other stockholders 
had joined either in the original pétition or in the application for leave 
to file the supplemental bill. The line of the Lake Shore Company's 
railroad extended from Buffalo, New York, through Pennsylvania, 
Ohio and Indiana, to Chicago, Illinois, with branches to varions points 
in Ohio, Indiana and Michigan. The supplemental bill, however, re- 
lated merely to that portion of its property which was within the 
Northern District of Ohio. If maintained, the setting aside of the 
consolidation and mortgages to this limited extent only, leaving such 
Ohio property as a disconnected and separate segment, would clearly 
resuit in almost inextricable confusion, disturbance of business con- 
ditions and innumerable complexities. Furthermore, under the Ohio 
statute already cited, the plaintifî upon seasonable requirement, might 
hâve obtained the highest value of its L,ake Shore stock during the two 
years preceding the consolidation agreement; while under the very 
terms of the consolidation it was entitled to receive for thèse 5 shares 
of stock 25 shares of the stock of the Consolidated Company. Under 
ail the circumstances we think the trial judge was entirely justified 
in his conclusion that the plaintiff's interest not only approximated 
(relatively at least) the irreducible minimum, but was in danger of no 
pondérable damage if its efforts to set aside the consolidation should 
fail. And upon considération of ail thèse facts, we are unable to con- 
clude that the action of the trial court in denying the plaintiff leave to 
file the supplemental bill constituted such abuse of discrétion as to 
now authorize us to review its action in this behalf. 

We are more content to reach this conclusion since, if the consoli- 
dation is in truth an unlawful restraining of trade in violation of the 
Acts of Congress and constitutions and laws of the several states in- 
volved, and a préjudice to the public interest, it may well be assumed 
that such interest will be properly protected by due proceedings in- 
stituted by the Fédéral and State authorities, in which ail parties may 
be brought before the court, a full investigation had, and the public 
wrongs, if any, corrected by efficient and appropriate remédies ; while, 
furthermore, the déniai of leave to the plaintiff to file a supplemental 
bill will not operate, as matter of law, to prevent it from seeking, by an 
appropriate and independent original bill, such relief in equity, if 
any, as it may be entitled to receive, in addition to such relief, if any, 
as it may hereafter properly obtain under its original pétition or any 
other appropriate pleading supplemental thereto, which it may be 
granted leave to file. 

6. Motions for substituted process. The plaintifî moved for subr 
stituted process, under section 57 of the Judicial Code, for the New 
York Central Company, the individual défendants, Read, Evans and 
Wood, the nine other railroad companies which had entered into the 
consolidation, and the trustées under the mortgages and indenture 



GENERAL INV. CO. V, LAKE SHOKE & M. 8. KY. CO. 179 

exécutée! by the Consolidated Company. This section provides that 
in any suit commenced in a District Court to remove any incumbrance, 
lien or cloud upon the title to property within the district, an order 
directing any non résident absent défendant to make défense may be 
served upon him wherever found, and that in default of his appear- 
ance, the court may entertain jurisdiction and proceed to an adjudica- 
tion of the suit, which shall, as regards such absent défendant, affect 
only the property which is the subject of the suit and within the juris- 
diction of the court. It relates, upon its face, only to suits affecting 
property which is the subject matter of the suit; and, it is clear, only 
authorizes the service of such appearance order upon a défendant 
asserting a claim thereto. There was hence no ground whatever for 
granting such appearance order (termed by the plaintiff "substituted 
process") for the Kew York Central Company under the original pé- 
tition; which was purely an action in personam that did not relate 
to any property within the district to which the New York Central 
Company was asserting any claim. For like reason there was no 
ground for the issuance of such appearance order for the défendants 
Read, Evans and Wood. And since leave was denied to file the sup- 
plemental bill there was necessarily no ground for issuing appearance 
orders for any of the défendants thereunder. 

7. For the reasons stated, the decree of the District Court is afïirmed, 
except in so far as it dismissed those portions of the original pétition 
wherein it was sought to enjoin the Lake Shore Company from enter- 
ing into the proposed agreement and consolidation and to hâve re- 
ceivers appointed of the stock owned by it in its varions subsidiary 
companies and decrees made for their disposition and management, 
and in so far as it awarded against the plaintiff the gênerai costs of the 
cause, as to which mattcrs the decree will be reversed (the first of thèse 
matters beïng now material, even after the consolidation, at least in so 
far as relates to the final adjudication of costs) ; but such reversai is 
with leave to the Lake Shore Company to hereafter move in the Dis- 
trict Court to dismiss so much of the original pétition as sought to 
enjoin the L,ake Shore Company from entering into the proposed 
agreement and consolidation on account of the alleged violation of the 
Fédéral Anti-Trust Act ; and except, f urther that in so far as the de- 
cree dismissed the remaining portions of the original pétition, it is 
modified so that the dismissal, Seing for want of indispensable parties, 
is without préjudice. The plaintiff will pay two-thirds of the costs 
of the appeal ; and the L,ake Shore Company, one-third. And the cause 
will be remanded to the District Court for f urther proceedings not in- 
consistent with this opinion. 



180 250 FEDERAL EEPOETEB 

THE WINDBUSH. 

THE EHINB. 

(Circuit Court of Appeals, Second Circuit. February 14, 1918.) 

Kos. 160, 161. 

1. Seamen <S=323 — Wages — Advance Payment — Constetjction and Scope oï 

Seamen's Act. 

Act June 26, 1884, c. 121, § 10, 23 Stat. 55, as amended by Seamen's Act 
March 4, 1915, c. 153, § 11, 38 Stat. 1168 (Comp. St. 1916, g 8323), making 
It unlawful, under penalty, to pay any seaman wages In advance, and 
provldlng that such payment shall not absolve the vessel from fuU pay- 
ment of wages after they sball hâve been earned, does not apply to tbe 
employment of seamen by American vessels in foreign ports; and when 
in such case the master eould not obtain seamen, except by paying a 
month's wage in advance, In accordance wltb the custom of the port, which 
was not there unlawful, and made such payment, the seamen are not 
entitled to recover full wages, without déduction of such payment, at the 
end of the voyage. 

2. Statutes <S=»225% — Constetjotion — Amendments. 

In the construction of an amendment to an exlstlng statute, the pre- 
sumption is that the same words used therein hâve the meanlng acquired 
by prlor judlcial construction, and in doubtful cases contemporaneous and 
departmental construction is entitled to weight 

Learned Hand, District Judge, dissentlng. 

Appeal from the District Court of the United States for the Eastern 
District of New York. 

Suits in admiralty by John Hardy and others against the barken- 
tine Windrush, the Shepard & Morse Lumber Company, claimant, 
and by Paul Neilson and others against the sailing ship Rhine, the 
Rhine Shipping Company, claimant. Decree for libelants in each case, 
and claimants appeal. Reversed. 

For opinion below, see 244 Fed. 833. 

Both the craft named are vessels of the United States, wlthln the meaning 
of that phrase as used in the statutes afifecting ships and seamen. In 1906 
both were at Buenos Ayres, the Windrush In May and the Rhine In October ; 
both wanted crews, and neither could get one (as Is stlpulated in writlng), 
"except by agreeing to pay one month's wages in advance." This means, as Is 
fairly shown by évidence, that the keepers of sailors' boardlng houses, com- 
monly known as "crimps," hâve in that port such control of seamen that no 
master can get a crew except by applying to them. 

Both vessels got crews through a crlmp; of the men shlpped, some had 
actually stayed with the boarding master, or obtained supplies from him, or 
both ; others had merely gone to him as a means of flnding employment ; ail, 
however, were treated alike, viz. taken before the United States consul, and 
slgned on the articles — each man giving to the boarding master an advance 
note for one month's wage, the payment of whlch was duly noted. AU the 
men so shipped knew what they were doing, and apparently regarded it as 
the custom of the port and a common incident of their trade ; so undoubtedly 
did the master ; nor is there any évidence that the captaln or owner proflted, 
directly or indirectly, by the transaction. They or their agents paid the ad- 
vance notes before the shlp left Buenos Ayres. 

On arrivai at New York, the libelants refused to recognlze the charges or dé- 
ductions, and brought suit for a month's pay apiece, as for so much wages 
wrongfuUy withheld. The court below awarded the amount claimed, and 

^=3For other cases see same topio & KBY-NUMBBR in aU Key-Numbered Digests & Indexe» 



THE WINDilUSH 



181 



claimants took thèse appeals, which were argued together ; the questions rais- 
ed being identical. 

Roscoe H. Hupper, of New York City, for appellants. 
Silas B. Axtell, of New York City, for appellee. 

Before WARD and HOUGH, Circuit Judges, and LEARNED 
HAND, District Judge. 

HOUGH, Circuit Judge (after stating the facts as above). [1] The 
facts of thèse cases are in ail material aspects those recited in The 
State of Maine (D. C.) 22 Fed. 734. Judge Addison Brown there gave 
judgment as to whether the then seamen's statute, commonly known as 
the Dingley Act (Act June 26, 1884, 23 Stat. 55), entitled libelants such 
as thèse to a recovery ; the présent question is whether (assuming the 
correctness of the décision cited) more récent législation, commonly 
known as the La Follette Act (Act March 4, 1915, 38 Stat. 1168), re- 
quires a dififerent ruling. 

The material words of the statutes may be put in parallel thus (some 
immaterial phrases being omitted or shortened) : 

1884 1915 

It is hereby made unlawful to pay It is liereby made unlawful to pay 
any seaman wages before leaviiig the any seamaii wages in advanoe of the 



port at which he may be engaged, In 
advance of the tiuie when hc; has ac- 
lually earned the same, or to pay such 
advance to any other person. or to 
pay any rémunération (to one not au- 
thorlzed by act of Congress) for ship- 
ment of seamen. 

Any person paying advance wages, 
or such rémunération shall be deenied 
guilty of a misdemeanor, and punished 
by fine and (at option of the court) im- 
prisonment. 

The payment of such advance 
wages, or rémunération, shall In no 
case absolve the vessel from fuU pay- 
ment of wages after they shall hâve 
been earned, and be no défense to a 11- 
bel for recoverj' of wages. 

This section shall apply as well-to 
foreign vessels as to vessels of the 
United States, and any foreign vessel 
violating the same shall be refused a 
clcarance. 



tlme when he has actually earned the 
same, or to make any order or note 
therefor to any other person or to 
pay any i)erson for the shlpment of 
seamen when payment is deducted or 
to be deducted from a seanian's wages. 

Any person violating the foregoing 
shall be deemed guilty of a misde- 
meanor and punished by fine, and (at 
option of the court) imprisonment. 

The payment of such advance wages 
or allotment shall in no case absolve 
the vessel fi'om full payment of wages 
after they shall bave been earned and 
shall be no défense to a libel for re- 
covery of wages. 

If any person shall receive from. 
any seaman any rémunération for pro- 
viding him with employment, such 
person shall he deemed guilty of a 
misdemeanor and punished with fine 
or imprisonment. 

This secti(m shall apply as well to 
foreign vessels, while in waters of the 
l'nited States, as to vessels of the 
Tliiitert States, and any foreign vessel 
violating the same shall be refused a 
clearance. 

Th(> master, etc., of any vessel (do- 
mcstic or foreign) seeking clearance 
from a port of the United States shall 
présent bis shipping articles at the 
ofiice of clearance, and none shall be 
granted unless the provisions of this 
article bave been coniplied with. 



The Case of The State of Maine held that this portion of the statute 
of 1884 had no application to the employment of seamen by American 



182 250 FEDERAL REPORTER 

vessels in foreign ports. That it was well decided we hâve no doubt, 
agreeing as we do with the reasons assigned, and considering the intel- 
lectual authority of a décision by that judge of the highest. The State 
Department, which, through the consuls, is charged with oversight of 
shipment of seamen abroad, accepted the ruling, and embodied it (with 
due référence to the décision) in the Consular Régulations (section 237) ;: 
nor did the passage of the act of 1915 produce any change in départ- 
mental instructions. What governed the action of the consul at Buenos 
Ayres, when thèse libelants were shipped, was the rule of The State of 
Maine. 

The only other interprétation of the Dingley Act thought instruc- 
tive hère is The Eudora, 190 U. S. 169, 23 Sup. Ct. 821, 47 h. Ed. 10O2, 
holding the statute applicable to foreign vessels in American ports, 
mainly on reasoning more elaborately set forth in Wildenhus' Case, 120 
U. S. 1, 7 Sup. Ct. 385, 30 h- Ed. 565 ; i. e., that any vessel and those 
on board her are subject to the civil and criminal law of the country 
into whose ports they corne. Such subjection is one of the implied 
conditions of entry, which is a favor, and not a right. Unless there 
has been a change in the légal content of the statute, its interprétation 
must remain unchanged. So far as the language above given is con- 
cerned, there is but one change that can be relied on; i. e., that the 
application of the act to foreign vessels is expressly limited to waters 
of the United States, from which it is argued that the application to 
domestic vessels must be universal. 

Of this it may be said that by the same train of reasoning some sig- 
nificance must be given to the section regarding clearances, in respect 
of which, for domestic ships, the act of 1884 said nothing. Must it 
then follow that prior to 1915 vessels of the United States violating 
the statute were necessarily entitled to clearance? Such a contention 
could not be made. Indeed, the argument for libelants proceeds main- 
ly and frankly on the ground that the act of 1915 is in its entirety so 
obviously remédiai that by it the status of seamen has been so radically 
changed, and the rigidity of their engagements so greatly relaxed, that 
it must hâve been intended to make the statute extraterritorially oper- 
ative, and uplift sailors by putting on their employers the cost of a 
rascally way of doing business, over which this country has no direct 
jurisdiction. 

Undoubtedly the methods of shipment exhibited in this record are 
vile, and it may be admitted as within législative power to improve the 
social customs of a contract breaker, by encouraging the act of breach ; 
but we are bound by what Congress did, as expressed in the words 
employed, having recourse for that purpose to "the whole context of 
the statute" (Johnson v. Southern Pacific Co., 196 U. S. 1, 25 Sup. 
Ct. 158, 49 E. Ed. 363), and this is true, even when the law is both 
remédiai and pénal, but with the "design to give relief more dominant 
than to inflict punishment." 

We find no words in the entire att rendering the particular kind of 
relief hère sought, certainly within the législative intent or meaning. 
We bave not before us any reports of congressional committees, which, 
however, may be consulted only to ascertain motive. McEean v. Unit- 



THE WINDEUSH 183 

«d States, 226 U. S. 374, 33 Sup. Ct. 122, 57 L. Ed. 260. There are, 
however, some rules of law which the Législature must hâve intended 
by the words of this act to overset, if the libelants are entitled to a 
decree. 

[2] This is an amendment to existing law, and the presumption is 
that the same words used therein hâve the meaning acquired by prior 
judicial construction. United States v. Trans-Missouri Ass'n, 58 
Fed. 67, 7 C. C. A. 15, 24 L,. R. A. 73. In every doubtful case, con- 
temporaneous (Houghton v. Payne, 194 U. S. 88, 24 Sup. Ct. 590, 
48 L. Ed. 888) and departmental (United States v. Cerecedo, etc., Co., 
209 U. S. 337, 28 Sup. Ct. 532, 52 L. Ed. 821) construction is ^entitled 
to weight, when the words of a statute get before a court. That the 
présent act is remédiai is admitted ; so was that of 1884; but both are 
also plainly pénal. That remédies of the kind hère demanded by libel- 
ants are more in favor now than in 1884 is true enough ; but words 
hâve not necessarily changed their ordinary meaning, and the rules of 
statutory construction remain unaltered. The remédiai and pénal por- 
tions of the part of the statute under considération cannot be sepa- 
rated ; if what thèse shipmasters did in Buenos Ayres was not lawful, 
it was unlawful, and a misdemeanor was committed. If it be possible 
now and in this country to enact a law making a crime of something 
donc by an American citizen in a foreign land (Rex v. Sawyer, 1 C. & 
K. 101), every and the strongest presumption is against such construc- 
tion (American, etc., Co. v. United Fruit Co., 213 U. S. 347, 29 Sup. 
Ct. 511, 53 L. Ed. 826, 16 Ann. Cas. 1047). 

The absurdity of considering the ship captains indictable is not de- 
nied ; therefore the contention becomes this : That this executed con- 
tract must be set aside, because the statute in effect déclares it ré- 
pugnant to the "policy and morality" of the people of the United States. 
We discover no consensus on this point of morals in the written law, 
there is no évidence on the subject, and the rule appealed to ordina- 
rily affects only executory contracts. The situation hère is this : Li- 
belants demand a part of their wages in accordance with the law of 
the United States ; respondents answer, We paid you that part in 
Argentine in accordance with the law of that country ; libelants reply, 
The law of the United States refuses to recognize that lawful and 
completed transaction. For so extrême a doctrine support can be 
found only in plain, unquestioned législative order; and such order 
cannot be discovered in this statute. 

In The Eudora and The State of Maine, supra, a subsidiary reason 
for the harmonious construction there given to the act of 1884 was that 
the announced rulirigs put foreign and domestic vessels on the same 
footing. That doctrine also was presumptively hefore Congress in 
passing the later statute. The ruling made below gives foreign vessels 
an advantage, certainly if (e. g.) the voyage is from one foreign port 
to another. No intent to do this is perceivable in the act. 

We hâve not overlooked The Imberhorne (D. C.) 240 Fed. 830, and 
The Talus (D. C.) 242 Fed. 954. In so far as they do not harmonize 
with the foregoing, we differ. 

Decree reversed, and causes remanded, with directions to dismiss 
the libels. 



184 250 FEDERAL RKPOETEB 

LEARNE'D HAND, District Judge (dissenting). If section 10 (a) 
had not been amended in the clause hère in question, I should hâve 
felt bound by the construction which Judge Brown had put upon it in 
The State of Maine (D. C.) 22 Fed. 734, under the well-settled ruie 
that a prior accepted interprétation of the statute is incorporated into 
its re-enactment. Moreover, I think that Judge Brovvn's décision was 
certainly right at the time he made it. His fourth reason for exchid- 
ing American ships from the opération of the statute while in foreign 
ports seems to me to be unanswerable. The statute did not discrim- 
inate, as he says, between foreign vessels and those of the United 
States, and it was necessary to give the gênerai language of the stat- 
ute the same application to one class as to the other. 

Under that statute, not only did Judge Brown hold that vessels of 
the United States were controlled only while hère, but the Suprême 
Court, in Patterson v. Bark Eudora, 190 U. S. 169, 23 Sup. Ct. 821, 
47 E. Ed. 1002, held that foreign vessels were bound, and obviously 
only while hère. There was, therefore, not the slightest reason, when 
amending the statute, to add the clause, "while in waters of the United 
States," in order to provide the necessary limitation. Eurthermore, 
I attach significance to the direct conjunction of the limiting clause 
with the phrase "foreign vessels." If the statute had read "as well to 
foreign vessels as to vessels of the United States while in the waters 
of the United States," there could hâve been no doubt ; but the limita- 
tion by its position directly affecting one class seems to me to give 
the other its gênerai meaning, unless there was good contrary reason 
in the context. 

I can see no reason in the context for such a limitation. Of course 
it results in some extraterritorial opération of the statutes, but only as 
regards vessels of the United States, and we are used enough to stat- 
utes which assume to do that. It would not strain the interprétation 
of a statute to make it apply to any act done on board ship. It is true, 
thèse acts were done ashore ; but they were to engage crews who 
should perform ail their services in a United States ship — they were 
a condition upon those services, and touched them as closely as possi- 
ble. When performed by an American master, at least, not to con- 
sider an owner, no valid distinction in the purpose of the statute seems 
to me to be found in the locus of the act. The penalties against 
"crimps" in foreign countries stand upon a différent footing; they 
are not associated with United States vessels and subject normally to 
the laws of the United States. 

Again, it is said that the provision making compliance with the stat- 
ute a condition on clearances shows an intention to limit its appli- 
cation. Yet this touches only the remedy, and it would be a hard 
rule which limited the substance, hecause the remedy could not in 
the nature of things be coextensive with its gênerai application. No 
inference seems to me justified from such a considération. 

Finally, the claimant insists that it puts United States vessels at a 
disadvantage in foreign ports. In such countries as do not protect 
their seamen against this f orm of exploitation, this is doubtless true ; 
but the provision itself présupposes that the seamen are at an économie 
disadvantage. The initiative in ail such efforts to impose a standard 



FEIOK V. STEPHENS 185 

of wages bears at first against local industry. If it is not undertaken, 
ail remédies must wait till other nations join. Granted the supposed 
injustice of the practice, the ships or the men must therefore suffer 
till the evils of the practice get gênerai récognition. The incidental 
hurden on trade may conceivably not hâve been thought of equal mo- 
ment with the putative welfare of the crevi^s. In any case it seems to 
me that such considérations are beyond the proper cognizance of courts 
of law. Surely we hâve no right to assume that the interest of the 
State dépends more upon the welfare of one of thèse conflicting éco- 
nomie classes than the other. 
I dissent. 



FEICK V. STEPHENS et al. 

In re SANDUSKY AUTO PAETS & MOTOK TRUCK CO. 

(Circuit C!ourt of Appeals, Slxth Circuit April 8, 1918.) 

No. 3092. 

1. CoNTKACTS <S=5321(1) — Performance — Nonpatment. 

Wiiile a contracter on the owner's default in payment bas the right to 
abandon further performance and sue for damages or in quantum meruit 
for the value of tlie work done, he Is not bound to do so, but bas the 
right to iceep the contract in force and refuse hls assent to any répudia- 
tion or rescission and fully complète the work. 

2. Mechanics' I-iens <S=279 — Abandonment of Conteact — Presumptions. 

A contractor's abandonment of a contract will not, where a mechanle's 
lien is asserted, be presumed, but must be establlshed by évidence. 
S. Mechanics' Liens tS=>92 — Abandonment of Contract — Filinq of Olaims. 
Where a contractor before he completed performance filed claims of 
lien, the fillng of such claims dld not amount to an élection not to go on 
witli the contract, but were merely precautionary steps In the attempted 
protection of his rights. 

4. EsTOPPEL <®=558 — Equitable Estoppel — Préjudice — Necesstty. 

Where neither the owner nor one holding a deed of trust on the prop- 
erty was misled by the contractor's fillng lien claims before he completed 
the work, no estoppel could arise from the filing of such claims. 

5. Mechanics' Liens <S=3l32(l) — Performance of Contract — Appointment of 

TausiEE. 

Where a contractor, who had not abandoned the work and had not com- 
pleted performance at the time receivers appolnted in a creditor's suit 
took charge of the owner's property, finished the work thereafter and 
within four months of the date of the receivers' appointment flled liis 
claim for a lien, the lien must be allowed under Gen. Code Ohlo, § 8314, 
allowing four months in which to perfect liens whether the work done 
after the appointment of the receivers be consldered unauthorized or 
not, for if unauthorized the appointment precluded performance and 
the lien claini was filed within four months after performance was ren- 
dered Impossible. 

6. Mechanics' Liens <S=»157(5) — Claim — Failube to Sustain One Claim. 

Under Gen. Code Ohlo, § 8314, a failure to sustain one or more items 
In the statement of aceount filed by mechanle's lien clalmant does not 
Invalidate the claim where the statement gave notice of a valid claim. 
T. Mechanics' Liens '®=>152— Claims — Statement. 

While ordinarlly a mechanle's lien statement under Gen. Code Ohlo, § 
8314, should give notice that it bas been flled within the statutory perlod, 

^saFor other cases see same topic & KBY-NUMBBR in ail Key-Numbered Digests & Indexes 



186 250 FEDERAL KBPOETEE 

and whlle If the contract has been complet ed this would necessitate some 
statemeht showlng the date of completion to be withiu four inonths of 
flling, the same rule does net apply when completion lias beeu preveiited.. 

8. Bankbuptct ®=3458 — Appeal — I'beservation of Gbounds of Review. 

Where claimant, who appealed from a decree of the District Court, 
which on pétition to review filed by the trustée In banki-uptcy and credl- 
tors disallowed his claim, tooli uo steps in the District Court to review 
the flnding of the référée and master disallowiiig a portion of his claim, 
that question is not reviewable by the Circuit Court of Appoals. 

9. MoBTGAGES ©=»151(3) — Priokiïy — Mechanics' Liens. 

A mechanic's lien takes priority over a deed of trust on the property 
given after the contract was entéred into. 

10. EsropPEL ©=^110 — Equitable Estoppel^Pxeauing. 

An estoppel to be relied on should \>e pleaded. 

11. MOETGAGES <S=>183 — l'EIORITY MECHANIC's ■ LiEN — ESTOPPEL. 

Though a contracter who received stock froni a corporation for whom 
he was erecting a building voted for the résolution uiider whleh a trust 
deed was executed and the deed contalned a covenant that the property 
was free from liens, such contracter is not estopped from asserting the 
priority of his mechanic's lien over the deed of trust where It dld not 
appear that any one knew of or acted on any représentation or act of his. 

Appeal from the District Court of the United States for the West- 
ern Division of the Northern District of Ohio ; John M. KilUts, Judge. 

In the matter of the bankrtiptcy of the Sandusky Auto Parts & Motor 
Truck Company. The claim of George Feick to a mechanic's lien, al- 
lowed biy the référée, was reversed on pétition to review by Edward 
S. Stephens, trustée in bankrtiptcy, and the Union Savings Bank & 
Trust Company of Cincinnati, and claimant appeals. Decree reversed 
and cause remanded, with directions. 

See, also, 250 Fed. 191, C. C. A. . 

In July, 1912, after appellant, George Feick, had submitted estimâtes, the 
Sandusky Auto Parts & Motor Truck Company entered into a verbal con- 
tract with Mm for the érection of certain buildings on Its plant in aecordance 
wIth certain plans. The original contract was subsequently changed. Cer- 
tain altérations and delays in starting caused the agi'eed priée to be increased 
from $12,576 to $15,175.50. Extras and altérations .made during the construc- 
tion were agreed upon. The reasonable value was approximately $3,700. 
Payments were to be made as the work progressed. 

No finie was fixed in the contract for the completion of the work or any 
spécifie part of It. By Deceniber, the work had progressed so that the plant 
could be operated. After that, progress was slo«' and with interruptions. 
Weather conditions prevented installation of part of the work during the 
winter. In Mardi, a few items of the extra work were i)erformed. In May, 
1913, floors and foundations, which had been disturbed by the frost, were re- 
laid. 

The référée and the district judge found that none of the contract work, oth- 
er than that of September, 1913, was done after the middle and llth of May, 
respectively. The évidence shows that thls May work was ouly to replace 
work originally done in 1912. For this replacement, no charge v\'as made and 
it is not part of the claimed lien. Bxcept for this and some small repairs 
made in July, no work was done by Feick after March until September 11, 
1913. 

Under a trust deed from the Sandusky Company to the Union Savings Bank 
& Trust Company, executed and recorded in March, 1913, the trust coinpany 
took possession of the plant on August 15, 1913. Three days later, possession 
was surrendered to receivers appointed on August 18, 1913, by the state court 
under a creditor's bill. On September 11, 1913, while the property was in 

(g=oFor other cases see same topic & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes 



FEICK V. STEPHENS 187 

the liaïKls of tlie roceivers, Feiek entered the premises In order, as advised 
by coiinsel, to perfect liis rlght to a lien. Betweeii that date and September 
19, 1913, he performed work at a eost of about $350 to $-100, in conipletion of 
the original contraet as arnended. This work was tlie installation of pluiubing 
and fixturcs in an additional toilet rooni. This toilet room, so completed, was 
the only part of the faetory that had not beon long theretofore occupied and 
used. Its use was not absolutely essential to the bénéficiai use of the faetory 
beeause of the other toilet facilities. Feicli's entry was wlthout ieave of the 
State court or of the receivers, and his performance was without their Ieave 
or that of the district court ; no one either expressly consented or objected 
thereto. On Seirtember 13, 1913, while the work was being done, the pétition 
in involuntary bankruptcy was filed. Adjudication followed in October. 

Ou Wcptember 23, 1913, Feick tiled in the recorder's office of Krie county, 
Oliio, Ihc affidavit and statement of account under which he claims the lien 
and served tlie requislte notice thereof. ïherein he specified: "Main building, 
as agreed, $12,576; testing building, as agreed, $2,170.70; water-elosets, as 
agreed, $431.80" — followed by the statement, "Last work done and contraet 
completed September 19, 1913." The total of thèse three items is carried out 
as .$15,175.50. ïhen follows itemization of the extras with the dates. The 
last items preceding those of September are the July repairs, $5, and the March 
material and labor. 

The September plumbing work could bave been done in April. Feick had 
delayed it beeause of the failure to pay him in accordance with the terms of 
the contraet. The company, however, had made no complaint and had 
never requested him to proceed or to complète his contraet. The only pay- 
ment received by him was $-'?,00O of the company's stock at par, stock that 
subsequently became worthless. 

To the pétition of the trustée in bankruptcy to sell the property, under 
whieh the property was sold and liens transferred to the proceeds, Feick filed 
what is termed an answer, but what was treated by ail parties as an inter- 
vening pétition to establish his lien. By the trustée'» answer thereto and the 
intervening pétition and answer of the trust company, the questions of the 
valldity of Feick's claini to a lien and of its priority over the trust deed 
were raised. The référée in bankruptcy, by whom the matter was heard, held 
the claim to be a flrst lien on the property. Ile disallowed, however, $375 of 
the $15,886.27 elaimed, holding that, as the appointment of the receivers pre- 
vented further performance under the contraet, a lien could not be establislied 
for the September work. On pétition to review the referee's order, the cause 
was referred to him as a spécial master to take and report additional testi- 
mony. Thereiipon, on ail the évidence taken by him as référée and as master 
and without any further évidence in the district court, the finding of the réf- 
érée in so far as it held the lien valld was reversed and the claim to any lien 
was disallowed. ïhe cause is before us on appeal from this decree. 

Malcolm Kelly, George E. Reiter, and H. L,. Peeke, ail of Sandusky, 
Ohio, for appellant. 

John F. Hertlein, of Sandusky, Ohio (King & Ramsey, of Sandusky, 
Ohio, of counsel), for Edward S. Stephens, trustée. 

Healy, Ferris & McAvoy, of Cincinnati, Ohio, for Union Savings 
Bank & Trust Co., trustée. 

Before KNAPPEN, MACK, and DENISON, Circuit Judges. 

MACK, Circuit Judge (after stating the facts as above). [1-4] 1. 
Appellee's contention that Feick had a right to abandon further per- 
formance under the contraet beeause of the failure to pay in accordance 
with its provisions and to sue for damages or in quantum meruit for 
the value of the work done, or after March, even upon the contraet 
as substantially performed, subject only to recoupment for the value 



188 250 B'EDBRAL KEPORÏER 

of the September work, niay be conceded. But he was not bound so 
to do. He was not compelled to take chances that what he had done 
would be held to be a substantial performance of the contract. He 
had a right to keep the contract in force, to refuse his assent to any 
répudiation or rescission and fuUy to complète the work. Whether 
or not he abandoned the further performance is a question of fact. 
It must be established hy the évidence. Abandonment will not be 
presumed. The delay, it is true, was great ; but Feick, evidently doubt- 
ing whether he would get any money, was justified in not increasing 
his prospective losses until compelled by some demand of the Com- 
pany or by self-interest, definitely to elect between completion and 
abandonment. 

On August 5, 1913, and August 16, 1913, he filed claims of lien. 
They were alike, except that in the second he gave crédit for the plumb- 
ing fixtures not then installed. The filing of thèse claims did not 
amount to an élection not to go on with the contract. They were mere- 
ly precautionary steps in the attempted protection of his rights. In 
thèse lien claims, he did not assert' either abandonment or substantial 
completion of the work. On the contrary, in that of August 16th, he 
expressly showed that it was not completed. Moreover, as neither 
the Sandusky Company nor the trust company was thereby misled or 
affected, no estoppel could arise thercfrom. We concur in the finding 
of the référée and of the District Court that Feick had not completely 
abandoned the work on August 18, 1913. 

[5] Feick's rights are governed by section 8314 of the Ohio General 
Code, in force when the contract was made, as such rights are ex- 
pressly preserved by the Act of April 16, 1913 (103 Ohio L,aws, p. 
369). Under section 8314, filing within four months from "the time 
of completing such lahor or furnishing such material" gives a lien from 
the date of the first item of labor performed or material furnished. 

We concur, too, in the view adopted by the référée and the court 
that, at the time of the appointment of the receivers, the contract 
was not completed, and the implication therefrom, that the plumbing 
work done in September, 1913, in accordance with the original esti- 
mâtes and contract, except as the location of the toilet room was 
changed by subséquent agreement, formed a substantial part of the 
original contract. Whether or not this plumbing work was in any sensé 
a separate and divisible pièce of work as found by the district judge, 
it is unnecessary to consider ; for it was specifically covered in the 
original estimate of cost and in the original single contract. Clearly, 
it was not a mère trifle lef t over after the contract had been deemed by 
the parties as finished and the work accepted as complète, for the parties 
never accepted it as complète or deemed it finished. In value, it amount- 
ed to something more than two per cent, of the entire cost ; and, while 
not absolutely essentiai, it was valuable for the proper equipment of 
the plant. And, as both the référée and the district judge held, but 
for the appointment of the receivers and the conséquent prévention of 
further performance, Feick would hâve had four months from the 
completion of the work in September, within which to file his claim 
of lien. 



FEICK V. STEPHENS 189 

Whether the appointment of the receivers operated to prevent him, 
without their or the court's express consent, from going on with the 
contract, with the resuit that, as held by the référée and the court, the 
dork donc in September is not to be deemed as lawfuUy performed, 
and therefore not donc under and pursuant to the contract, we need 
not détermine. As the claim was filed for record within four months 
of the date of the appointment of the receivers, we agrée with the 
conclusion of the référée contrary to that of the district judge, sus- 
taining its validity in the sum of $15,511.27 with interest. 

Any other conclusion would lead to this obviously unjust resuit: 
That one who had f urnished some work or labor and who had properly, 
at the request of the other party or pursuant to the ternis of the orig- 
inal contract, done nothing for more than four months, would lose his 
right to a lien for the work done, if, after the four months, completion 
of the job was thus prevented. Neither text nor context of the statute 
nécessitâtes this construction. On the contrary, under the libéral con- 
struction of mechanic's lien laws, which concededly prevails in Ohio, 
it has been there determined that a lien may be filed "within four 
months from the time it (the contract) was completed or the contract 
wrongfully put an end to by * * * the owner." Pedretti v. Stich- 
tenoth, Ex'r, 6 Ohio Cir. Ct. R. 516, 519. 

It cannot, however, be material whether the completion was pre- 
vented before or after four months from the date of the last work 
actually done. The statutory period for filing is four months ; not 
four months from the time that a part of the work, which subsequently 
turns out to be the last part, is completed, but four months from the 
time that the work contracted for either shall hâve been completed 
or the completion prevented. Whether the last work before that of 
September was done on May llth or 15th, as the référée and court 
respectively found, that is, less than four months before August 18th, 
or in March, as the trustée in bankruptcy asserts, that is, more than 
four months before August 18th, is therefore immaterial. In either 
case, Feick would hâve been justified on August 18th, but for the re- 
ceivership, in postponing the filing until four months after he should 
hâve completed the entire work pursuant to the contract. Only if and 
when such completion was rendered impossible by the appointment 
of the receivers could the statutory period be deemed to begin to run. 

[6] The statement of account, as filed, was sufficient. It gave notice 
of a valid claim. A failure to sustain one or more items in such an 
account, concededly, does not invalidate the claim. And, in our judg- 
ment, it is immaterial that such items are the only ones performed 
within four months before the claim is filed for record. 

[7] While the claim should ordinarily give notice on the face of 
it that it has been filed within the statutory period, and while, if the 
contract has been completed, this would necessitate some statement 
showing the date of completion to be vi'ithin the four months, the 
same rule should not apply when completion has been prevented. 
There is no statutory requirement that either the date or the fact of 
such prévention be stated. We cannot therefore deem the statement 



190 250 FEDERAL REPORTER 

of account invalid because the last item of the claim as eventually 
allowed was performed more than four months before the filing, es- 
pecially when, as in this case, the statement shows clearly that that 
performance did not complète the work and that the contract re- 
mained incomplète until within the four months' period. 

[8] Feick's failure to take any steps in the District Court to se- 
cure a review of the finding of the référée master, disallowing the 
claim as to $375, precludes our considération thereof . 

[9] 2. The finding of the validity of Feick's lien establishes also 
its priority over the trust deed of March, 1913, inasmuch as the me- 
chanic's lien is effective as of August, 1912, unless, as argued by the 
trust company, Feick is estopped from asserting his priority. 

[10, 11] The claim of estoppel as against bona fide holders of the 
bearer notes secured by the trust deed rests upon the fact that Feick, 
as a stockholder, voted in January, 1913, for the resolution under which 
the trust deed was executed by the Sandusky Company. This deed 
contained a covenant that "said property so conveyed is free and clear 
of ail liens and incumhrances, and that it, the company, its successors 
and assigns, will forever warrant and défend the same against the 
lawful demands of ail persons claiming or to claim the same," and a 
récital that the resolution of the board of directors authorizing its 
exécution was unanimously ratified at a stockholders' meeting at which 
ail of the stockholders were présent in person or by proxy. 

To dispose of this contention, it might suffice to point out that, while 
the facts appear from the évidence, nowhere in the pleadings is there 
any allégation that Feick was a stockholder or that he voted for the 
resolution; nowhere is the charge or défense of estoppel made; no 
issue thereon properly arose in the case, altho.ugh, if requested, amend- 
ments to the pleadings might hâve been allowed. 

Assuming, however, that, as évidence bearing on such an issue was 
received, the question is properly before us, the contention cannot be 
sustained. We need not consider whether under any circumstances 
such participation in such a transaction could estop a stockholder from 
maintaining his claim to priority over the trust deed for a mechanic's 
lien, inchoate at the time of the stockholders' meeting and ripening into 
a perfected lien long thereafter. For hère, a vital élément of estoppel 
is lacking; no one is proven to hâve known of or acted upon any 
représentation or act of Feick. Knowledge of the statements in the 
trust deed does not suffice. That would demonstrate, at best, reliance 
upon the représentations of the company and its officers that persons 
unnamed had authorized the covenant. Knowledge or information 
ihat Feick was such a stockholder is, in any event, essential to estop 
him. Of this, there is no évidence whatsoever. 

The decree must be reversed and the cause remanded, with direc- 
tions to enter a decree in accordance with the views herein expressed. 



FEICK V. STEPHBNS 191 

FEICK V. SÏEPHENS et aL 

In re SANDUSKY AUTO PARTS & MOTOR TETJCK CD. 

(Circuit Court of Appeals, Sixtli Circuit. April 8, 1&18.) 

No. 3091, 

Bankbuptcy iS=5440 — "Oonteoveries Arising in Bankbuptcy Pboceedinqs" 
— Kbview. 

Where, on a pétition by the trustée to sell the property of the bank- 
nipt, a lien claimant flled an Intervening pétition asserting tlie priority 
of his lien over a deed of trust and the trustée under the trust deed 
filed an answer, the question of priorities thus raised was a controversy 
arising in a proceeding in bankruptcy and tberefore reviewable ouly by 
appeal under Bankr. Act July 1, 1898, c. 541, § 24a, 30 Stat. 553 (Comp. 
St. 1916, § 960S). 

[Ed. Note. — For other définitions, see Words and Phrases, Second 
Séries, Controversy Arising in Bankruptcy Proceeding.] 

In Error to the District Court of the United States for the Western 
Division of the Northern District of Ohio ; John M. Killits, Judge. 

In the matter of the bankruptcy of the Sandusky Auto Parts & Mo- 
tor Truck Company. Pétition by Edward S. Stephens, as trustée, 
and another, for the sale of property of the bankrupt, in which George 
Feick filed an intervening pétition. There was judgment denying the 
intervening pétition, and intervener brings error. Writ dismissed. 

Malcolm Kelly, George E. Reiter, and H. L. Peeke, ail of Sandusky, 
Ohio, for plaintifï in error. 

John F. Hertlein, of Sandusky, Ohio (King & Ramsey, of Sandusky,, 
Ohio, of counsel), for défendant in error Stephens. 

Healy, Ferris & McAvoy, of Cincinnati, Ohio, for défendant in er- 
ror Union Sav. Bank & Trust Co. 

Before KNAPPEN, MACK, and DENISON, Circuit Judges. 

MACK, Circuit Judge. In case No. 3092 (250 Fed. 185), we hâve 
this day decided the merits of the matters sought to be brought hère 
for review by writ of error. The question of the validity of an alleged 
mechanic's lien on a bankrupt's property and its priority, if valid, over 
the lien of a trust deed in the nature of a mortgage raised by what was 
properly treated by the parties as an intervening pétition of the Hen 
claimant to establish his lien and the answers thereto of the trustée 
in bankruptcy and the trustée under the trust deed, involves a contro- 
versy arising in a proceeding in bankruptcy. It is therefore reviewable 
only by appeal under section 24a of the Bankruptcy Act. Houghten 
V. Burden, 228 U. S. 161, 33 Sup. Ct. 491, 57 E. Ed. 780. 

Writ of error dismissed. 

<g=aPor other cases see same toplc & KEY-NUMBBR in ail Key-Numbered Dlgests & Indeit» 



192 250 FEDERAL REPORTER 

STEPHENS V. UNION SAV. BANK & TRUST CO. OF CINCINNATI et al. 

In re SANDUSKY AUTO PARTS & MOTOR TRUCK CO. 

(Circuit Court of Appeals, Sixtti Circuit. April 8, 1918.) 

No. ai02. 

Bankruptoy <S=303(3) — Préférences — Evidence. 

Evidence held suflicient to sustain a flndins tliat the bankrupt, at ttie 
time it delivered notes as collatéral seeurity for a pre-existing debt, wa« 
solvent, though it was adjudlcated a bankrupt on a pétition flled less 
than four months tliereaf ter. 

Appeal f rom the District Court of the United States for the Western 
Division of the Northern District of Ohio ; John M. Kilhts, Judge. 

In the matter of the bankruptcy of the Sandusky Aiito Parts & 
Motor Truck Company. From a decree sustaining the validity of a 
mortgage securing certain notes held by the Union Savings Bank & 
Trust Company of Cincinnati and others, Edward S. Stephens, trus- 
tée in bankruptcy, appeals. Afifirmed. 

J. F. Hertlein, of Sandusky, Ohio, for appellant. 

King & Ramsey, of Sandusky, Ohio, C. A. Neff and White, John- 
son, Cannon & Neff, ail of Cleveland, Ohio, and Healy, Ferris & Mc- 
Avoy, of Cincinnati, Ohio, for appellees. 

Before KNAPPEN, MACK, and DENISON, Circuit Judges. 

MACK, Circuit Judge. This appeal was heard together with that 
in case No. 3092 (2.S0 Fed. 185, C. C. A. ), in which an opin- 
ion was filed this day. The trust deed to appellee, therein referred to, 
secured 300 notes of $500 each. Sixty-five of thèse notes were sold 
for cash. Concededly, as to the holders thereof, the lien of the trust 
deed is valid. In view of our conclusion that the lien is vahd as to ail 
of the notes, we need not détermine whether 5 of them are to be classi- 
fied with the cash notes or with the balance of the notes. Thèse others 
were delivered as collatéral seeurity for a pre-existing debt, a few days 
less than four months prior to the filing of the pétition in bankruptcy, 
and the validity of the lien results in giving the holders a préférence. 

The amount realized from the sale of the mortgaged property after 
the payment of prior liens, while more than sufficient to pay the first 
class of note holders, is not sufficient to pay both classes. The contro- 
versy therefore is between the two classes of note holders as well as 
between the second class and the trustée in bankruptcy. 

Concededly, if the company was solvent within the définition of the 
Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 544) at the date of 
the delivery of the notes, the lien must be upheld. The référée master 
found solvency. The district judge said in respect to this finding: 

"We feel that tlie spécial master maj' liave been a little sanguine in holding 
absolutely that the bankrupt was not insolvent in May, 1913. The inargin 
as found by the auditors as tlie probalile situation in May Is too narrow, con- 
sldering the magnitude of the company's assets and liabilities, to enable one 
to speak very posltively." 



igsall'or other cases see same topic & KBY-NUMBER in ail Key-Numbered Digests & Indexes 



8TEPHENS y, imiON SAV. BANK 4 TRUST CO. 193 

But he upheld the lien on the ground that : 

"Reasonable diligence in inquiry wlien once inquiry is suggested to a 
creditor is ail tliat is demanded, and it seems to us, witli the light we hâve 
on this case, that the exercise of reasonable diligence by any one of thèse credi- 
tors to inquire would not reïïonably hâve brought to the creditor knowledge in 
May, 1913, or at any time when any creditor received one of thèse gold notes 
as collatéral, that the debtor was in fact insolvent." 

The margin referred to by the judge, as found by the auditors, was 
over $72,000 based in rmind figures on $350,000 assets and $278,000 
liabilities. 

If, as the district judge assumed, the report of the auditors was ap- 
proximately correct, thrin in our judgment the finding of the master 
that the Company was at that time solvent must be upheld. The fur- 
ther fact that this margin was ail that was left of a total of about $325,- 
000 of capital paid in during the preceding 1% years of the company's 
life, and that at the time the company was losing at the rate of $2,000 
a week, does not suffice to raise any question as to its solvency at that 
time, within the définition of the Bankruptcy Act. 

Whether or not, at that time, the assets of the company, at a fair 
valuation, exceeded the liabilities by $72,000, or whether at that time 
the company was insolvent, because in the language of the Bankruptcy 
Act the aggregate amount of the property was not upon a fair valua- 
tion suf^cient in amount to pay the debts, is fuUy discussed by the 
master in his report. Qnly serious doubts as to the correctness of his 
conclusion based upon Ihe testimony of witnesses produced bef ore him, 
as well as upon documantary évidence, could justify a reversai. From 
our examination of the record, however, we are led to the same con- 
clusion and for the same reasons. Further discussion of a pure ques- 
tion of fact, therefore, seems to us unnecessary. 

Decree affirmed. 



(250 Fed. 193) 

STEPHP^NS V. TJNION SAV. BANK & TRUST CO. OF CINCINNATI et al. 

In re SANDUSKY AUTO PARTS & MOTOR TRUCK CO. 

(Circuit Court of Appeals, Sixth Circuit. April 8, 1918.) 

No. 3101. 

l£t 3rror ai, the District Court of the United States for the Western Division 
of the Northern District of Ohio ; .Tohn M. Killits, Judge. 

In the matter of the bankruptcy of the Sandiisky Auto Parts & Motor Truck 
Company. Oh intervening pétition of the Union Savings Bank & Trust 
Company of Cincinnati and others, the validity of a deed of trust was 
sustained, and Edward S. Stephens, trustée in bankruptcy, brings error. Writ 
dismlssed. 

J. F. Hertlein, of Sandusky, Ohio, for plaintifC in error. 

Klng & Ramsey, of Sandusky, Ohio, C. A. NefC and White, Johnson, Cannon 
& Neff, ail of Cleveland Ohio, and Healy, Ferris & McAvoy, of Cincinnati, 
Ohio, for défendants in error. 

Before KNAPPEN, MACK, and DENISON, Circuit Judges. 

MACK, Circuit Judge. The merlts of the controversy sought to be raised bj 
the writ of error hâve been this day decided in case No. 3102 (250 Fed. 192, 
250 F.— 13 



194 250 FEDERAL REPORTEE 

C. C. A. ) on appeal. As the sole question involved is the validlty of 

the lien of a trust deed on property of the banlirupt, for tlie reasons stated 

in case No. 3091 (2S0 Fed. l&l, C. C. A. ), tMs day decided, the. writ 

of error must be dismlssed. 



THE ADA. 

(Circuit Court of Appeals, Second Circuit. March 13, 1918.) 

No. 136. 

1. Admiraltt <©=>! — Courts — Jurisdiction. 

A court of admiralty eannot retaln Jurisdiction to dispose of nonmari- 
time subjects, for the purpose of doing complète justice, after the manner 
of courts of equity. 

2. Admiralty <S=»10 — Contracts — Sale or Vessel. 

Where a contract for the charter of a vessel gave the charterer an 
option to purchase the saine for the sum specified in the charter party as 
the hire, the contract must be deemed one for the sale of the vessel, and 
so it was not one withln the jurisdiction of a court of admiralty, and a 
proceeding in rem was not an appropriate remedy for breach. 

3. Admiralty <©=»10 — Jurisdiction — Enfobcement op Oonthacts. 

A contract, enforceable in admiralty, must be wholly maritime. 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

lyibel by the Universal Transportation Company, Incorporated, 
against the steamship Ada, her engines, etc., claimed by the Rederiak- 
tiebolaget Amie. From a decree for Ubelant (239 Fed. 363), claimant 
appeals. Reversed. 

Kngel Bros., of New York City, and Conlen, Brinton & Acker, of 
Philadelphia, Pa. (W. J. Conlen, of Philadelphia, Pa., and Van Vech- 
ten Veeder and Joseph G. Engel, both of New York City, of counsel, 
^lnd J. T. Manning, Jr., of Philadelphia, Pa., on the brief), for appel- 
ant. 

Kirlin, Woolsey & Hickox, of New York City (J. P. Kirlin and 
Cletus Keating, both of New York City, of counsel), for appellee. 

Before WARD, ROGERS, and HOUGH, Circuit Judges. 

WARD, Circuit Judge. December 10, 1915, the respondent, the 
Amie Company, as owner of the Swedish steamer Ada, entered into an 
agreement with the libelant, the Universal Company, described as 
charterer. The steamer, then at sea, was chartered for about six 
months for the sum of $165,000, payable $40,000 down, $50,000 fifteen 
days after arrivai, $45,000 three months thereafter with interest at 6 
per cent, from the date of the agreement, $30,000 six months from the 
date of payment of the $45,000, with interest at 6 per cent, from the 
date of the agreement. The payments were subsequently changed, so 
as to make the second installment $60,000 and the last $20,000. The 
Universal Company was to pay ail the expenses of running and main- 
taining the vessel, the risk of the loss of the vessel was on it, and it 
was to hâve the option of purchasing her for the price of $165,000 at 

(gzijPor other cases see same topic & KBY-NCMBER in ail Key-Numbered Digests & Indexes 



THE ADA 195 

any time, the owner agreelng to deposit a bill of sale in escrow with 
the United States Mortgage & Trust Company as soon as possible. 

January 25, 1916, the Universal Company notified the respondent 
that it would purchase the steamer and was ready to pay on receiving 
bill of sale. April 5 it tendered the purcliase money to the defendant's 
attorneys and asked for a bill of sale, which was not delivered. April 
6 the respondent, alleging that the Universal Company had failed to 
pay the installment of $45,000 on April 4, the day it was due, withdrew 
the steamer, which was then at sea on her way to New York, depriving 
the Universal Company both of the use of the vessel af ter arrivai and 
discharge, as well as of the title. This action it justified on the ground 
that the contract required the Universal Company to pay the hire 
"punctually" i. e., on the due date — and gave the Amie Company, in 
case of its failure to do so, the right to withdraw the steamer "imme- 
diately." As soon as the Amie Company had discharged the cargo 
loaded by the Universal Company, it resumed complète and exclusive 
control of the vessel. 

April 24 the Universal Company filed a libel against the steamer in 
rem and against the Amie Company in personam to recover the dam- 
ages sustained by it, both for the breach of the charter and for breach 
of the contract of sale. May 3 and 4, 1916, the Amie Company filed 
exceptions to the libel, on the ground that the damages claimed arose 
from a breach of contract for the sale of the vessel, which was a cause 
of action not within the admiralty jurisdiction. May 8, 1916, the cause 
came on for trial before the exceptions were argued. The District 
Judge found that the Amie Company had wrongfully withdrawn the 
vessel, and was liable to the Universal Company for the loss sustained 
by it as charterer, but that the damages for breach of the contract of 
sale were not recoverable in admiralty. We shall dispose of the case 
on grounds which relieve us from the duty of considering the merits 
at ail. 

[1, 2] Evidently the whole controversy could hâve been disposed of 
in an action at law, but the jurisdiction of a court of admiralty is con- 
fined to maritime subjects. It cannot, having obtained jurisdiction, dis- 
pose of nonmaritime subjects, for the purpose of doing complète 
justice, after the manner of courts of equity, nor can it distribute 
funds in its possession, as do' courts of equity and bankruptcy, among 
ail creditors, preferred and gênerai. Its power to dispose of the pro- 
ceeds of a vessel, though it extends to the payment of nonmaritime 
liens, after maritime liens hâve been satisfied, does not extend to claims 
in personam or of gênerai creditors, except so far as to pay over any 
surplus to the owner. 

A charter party may, of course, contain covenants both maritime and 
nonmaritime, which in case of breach may be disposed of ; the former 
either in the admiralty or at common law, and the latter at common 
law only. This charter party contains such nonmaritime covenants, 
namely, that of the Universal Company to buy the captain's chronom- 
eter for $200, and the ice box on the steamer for $250; for the 
breach of either of thèse covenants, no one, we suppose, would con- 
tend that suit could be maintained in the admiralty. 

If this charter had provided for the use of the vessel for six months 



196 250 FEDERAL BBPOETBB 

at a specifîed charter hire, and had given the charterer tlie option there- 
after to purchase at a fixed price, there would be two separate causes 
of action; the former justiciable either in admiralty or at law, and the 
latter at law only. But the right to use and the right to buy the steam- 
er in this case were inseparably connected. The price for the use for 
six months was the same as the price for the absolute ovvnership. Ob- 
viously no one would fail to exercise such an option. AU the provi- 
sions of the agreement show that the main intention was a contract of 
sale. Installraents of so-called charter hire which were not practically 
paid down were to bear interest from the date of the agreement, and 
the charterer had a right to a bill of sale at any time upon paying the 
full charter hire. Certainly, as soon as the Universal Company exer- 
cised its option to buy and tendered the price, the contract became one 
of sale. 

[3] It is well established that a contract enforceable in admiralty 
must be wholly maritime. Grant v. Poillon, 20 How. 162, 15 L,. Ed. 
871. In this case it was held that the master and part owner could 
not maintain a suit in admiralty for freight against shippers with 
whom he was a partner, because a partnership account would hâve to 
be settled. In Turner v. Beachem, Taney, 583, Fed. Cas. No. 14,252, 
Mr. Justice Taney held to the same effect, saying : 

"And I consider It to be a elear rule of admiralty jnrisdiction that, although 
the contract which the party seelvs to enforce is muritime, yet, if he has con- 
nected it inseparably with another contract ovei- which the court has no 
jurisdictlon, and they are so blended together that the court cannot décide 
one, with justice to both parties, without disposing of the other, the party 
must resort to a court of law, or a court of equity, as the case may require, 
and the admiralty court cannot taUe jurisdiction of the eontroversy. The case 
of Grant v. Poillon was decided upon this ground at the last term of the Su- 
prême Court. 20 How. 162 [15 L. Ed. 871]." 

The Pennsylvania, 154 Fed. 9, 83 C. C. A. 139, was our own décision 
and is very clear. The steamer Pennsylvania was demised to the char- 
terer, who contracted to take young men on a described sea voyage, to 
occupy nine months, and at the same time put them through a course 
of study. He received large sums, prepaid, on account of thèse con- 
tracts, but never completed the altérations of the steamer or performed 
the contract in any respect. The parents of the young men having 
libeled the steamer, the owner, as claimant, objected that the contract, 
being one for éducation, as well as for transportation, was not within 
the admiralty jurisdiction. The District Judge held that it was, but dis- 
missed the libel on the ground that the proceeding should hâve been in 
personam, and not in rem. We affirmed the decree, on the ground that 
there was no jurisdiction whatever in admiralty. 

The décisions principally relied upon by the respondent are quite 
consistent with the foregoing: The Port Adélaïde, 62 Fed. 486, 10 
C. C. A. 505 : The master of the vessel, whose whole capacity had been 
taken by the charterer, shipped cargo and collected freight on owner's 
account. This, of course, was a purely maritime transaction, and the 
charterer was held to hâve the right to adopt the contract as made for 
its benefit and to recover the amount. Gross v. New York & Texas 
Co. (D. C.) 107 Fed. 516: This was a libel to recover marine insur- 



THE ADA 197 

ance, which the carrier agreed in the bill of lading to take out for the 
benefit of the shipper. 

Then there are cases of the distribution of funds in admiralty courts, 
as to which, except in the case of the owner, only lien creditors hâve 
any standing. The Lottawanna, 20 Wall. 201, 221, 22 L. Ed. 259; 
The Edith, 94 U. S. 518, 24 L. Ed. 167; The Guiding Star (C. C.) 18 
Fed. 263 ; The Willamette Valley (D. C.) 76 Fed. 838 ; Benedict's Ad- 
miralty, § 506. Thèse cases illustrate the différence between the pow- 
ers of courts of equity and of admiralty. The former would bave dis- 
posed of the claims of gênerai as well as of lien creditors. Within the 
same principle fall cases where part owners disagree and the vessel is 
sold. The proceeds could not be distributed at ail, unless accounts be- 
tween the owners were settled. The John E. Mulford (D. C.) 18 Fed. 
455; The Katie O'Neill (D. C.) 65 Fed. 111; The Emma B. (D. C.) 
140 Fed. 771. 

Other cases relied on are: The Electron, 48 Fed. 689, 21 C. C. A. 12 ; 
Id. (D. C.) 56 Fed. 304; Id., 74 Fed. 689, 21 C. C. A. 12: In this case 
the libel was filed to recover for maritime supplies, viz. electric batteries. 
The court did not pass at ail on the question of patentabiHty. Judge 
Brown held that notice that the batteries had been held to be an in- 
fringement in a patent suit was a défense to the owner against pay- 
ment; whereas, we held that the notice of the décision alone did not 
amount to an éviction, though the claimant of the vessel would be en- 
titled to a déduction for being deprived of the right to use the batter- 
ies. In Evans v. New York & P. S. S. Co. (D. C.) 145 Fed. 841, and 
163 Fed. 405, the consignée of rubber sued the carrier and the ware- 
houseman to whom the carrier had delivered the shipment to recover 
for a shortage. Exceptions were filed to the libel, on the ground that 
there was no maritime liability on the part of the warehouseman, which 
were overruled. When the case came on for trial, this view was not 
sustained, but the liabiHty of the warehouseman, though nonmaritime, 
was made to dépend on his obligation to indemnify the carrier. We 
are not able to approve this décision, which is the only one cited in- 
volving a nonmaritime claim. In the cases on which the court relied, 
Salisbury v. Seventy Thousand Feet of Lumber (D. C.) 68 Fed. 916, 
Burroughs was held liable for demurrage as charterer of the lighter, a 
purely maritime subject; in Dailey v. City of New York (D. C.) 119' 
Fed. 1005, and The Crown of Castile (D. C.) 148 Fed. 1012, the parties 
brought in were ail liable upon maritime grounds. Finally, the case of 
Wilhelmsens v. Canadian Co., 224 Fed. 881, 140 C. C. A. 303, involved 
questions wholly maritime ; the point decided being that a garnishee's 
right of set-oflf against the libelant's attachment was larger than the 
respondent's right of set-off against the libelant. 

The decree is reversed. 

ROGERS, Circuit Judge. I concur in the conclusion that the de- 
cree must be reversed. The jurisdiction of the admiralty courts is 
restricted to maritime subjects. The contract involved is plainly a 
contract of sale. For a contract to fall within the admiralty juris- 
diction, it must concern transportation by sea, relate to navigation or 



198 250 FEDERAL EËPORTER 

maritime employment, or be one of navigation and commerce on nav- 
igable waters. And the contract hère does not come under any of 
thèse heads. The rule is settled that contracts for building a ship, or 
contracts for selling a ship, are not maritime contracts, and within the 
jurisdiction of the admiralty. 

I also agrée that courts of admiralty, having obtained jurisdiction, 
do not dispose of nonmaritime subjects, after the manner of courts of 
equity, for the purpose of doing complète justice. While admiralty 
courts act as courts of equity so far as their powers go, their powers 
are limited to maritime contracts or transactions, and they hâve no gên- 
erai jurisdiction to administer relief as courts of equity, or to admin- 
ister complète relief. They difïer, too, from the equity courts, in that 
they do not undertake to détermine équitable rights. 

I désire, however, to withhold any expression of opinion concerning 
certain cases referred to in the above opinion, and which do not seem 
to me to be involved in the matter now before the court. 

HOUGH, Circuit Judge. In the resuit announced I concur; my 
reasons are somewhat différent. 

The rule that a contract, to be maritime, and therefore within ad- 
miralty jurisdiction, must be "wholly maritime," means that the prin- 
cipal subject-matter of agreement gives character to the whole. This 
construction of the phrase was adopted by this court in The Pennsyl- 
vania, 154 Fed. 9, 83 C. C. A. 139. Applying it to this case, I doubt 
whether the contract made had any of the marks of a charter ex- 
cept the name, but it is certain that in every essential it was an agree- 
ment to sell ; the right to use pending payment was an incidental mat- 
ter. 

Further, since this appeal in admiralty is a new trial, we must con- 
sider the présent situation of the parties, from which it seems plain to 
me that, in the common-law suit, libelants hâve recovered the value of 
the ship at date of breach, with interest, while their decree in admiralty 
represents loss of use of thë same ship for a period subséquent to 
breach, and when, in contemplation of law, the value of the vessel was 
theirs, and they were earning interest upon such value. There is no 
différence, I think, in respect of damages for a total loss of vessel's 
use by collision, and the same loss by total breach of a contract such 
as this. The Hamilton (D. C.) 95 Fed. 844, and The Fontana, 119 Fed. 
853, 56 C. C. A. 365, apply. The reasoning of The Philadelphia, 1917 
Probi. 101, does not convince. Therefore, by recovering damages for 
loss of use in admiralty and interest on value at law, there has been 
a double recovery. 

Apparently, from the bill of exceptions at law, interest on the ver- 
dict was allowed from a later date than that of breach ; if this was a 
waiver of interest, because of the recovery in admiralty, it should make 
no différence. A party does not become entitled to something he has 
no légal right to, by waiving something less legally due him. 

I also note a disagreement with the treatment of Evans v. New 
York, etc., Co. and Wilhelmsens v. Canadian Co., supra. Neither seem, 
to me to hâve any relation to the case in hand, while if, by référence 



WESTERN UNION TELEGRAPH CO. V. LOUISVILLE & N. B. CO. 199 

to the Evans décision, it is meant to express the opinion that admiralty 
has no power to implead a surety or party responsible over, under the 
equity of the fifty-ninth rule (29 Sup. Ct. xlvi), I must dissent. 



WESTEKN UNION TELEGRAPH CO. v. LOUISVII-LE & N. R. CO. 

(Circuit Court of Appeals, Fiftli Circuit. April 2, lî)18.) 

No. 3137. 

1. Equity C:::3l41(l) — Pleading — Bill. 

As the purpose of a pleading is to raise or meet issues of law or fact, 
and equity rule 25 (198 Fe<l. xxv, 115 C. C. A. xxv) provides for a simple 
statement of the Tiltimate facts, while rule 21 (198 Fed. xxlv, 115 C. C. 
A. xxiv) autliorizes striking out of redundant or impertinent matter, 
statemcnts of law, statutory and customary, aceompanied by copious 
références tx) décisions, should not bo ineluded in a bill. 

2. Telegraphs and Téléphones <S=>11 — Rights of Way — Ownekship. 

Under a contract whlch was subject to termination by tlie parties, a 
telegraph company establlshed its Unes on the right of way of a rail- 
road company. ïhereafter the telegraph company terminated the con- 
tract, attempting to eondemn an easement for its line Conderanation was 
enjoined by the Georgla state court; the railroad company asserting its 
désire to construct a telegraph line for railroad purposes and its para- 
mount right to that part of the right of way occupied by the telegraph 
company. Thereafter the telegraph company filed a bill in fédéral court, 
asserting in the alternative its paramount right to the line already occu- 
pied. Held that, whlle an owner of property may estop hlmself by 
standing by and allowing an intruder to improve the property for the 
use for which it was taken, and the fact that the intruder is a publia 
service corporation should be considered, yet, as tlie telegraph com- 
pany enterod Tinder contract, and the railroad company, at ail times 
after termination of contract and defeat of the conderanation proeeed- 
ings, asserted its paramount right to the premises, the telegraph com- 
pany is not entitled to the easement as against a railroad company. 

3. JuDGMENT ©=582S(-3) — State Court — Kffect in Fédéral Court. 

lu such case, where the good faith of railroad company's exercise of 
its paramount preferential right to use for its own telegraph business the 
premises formerly used by the telegraph company was not negatived, a 
fédéral eciuity court is withoiit jurisdiction to entertain eondemnation pro- 
ceedlngs for an easement of the telegraph line. 

4. Eminent Domain <@=3l87 — Possession Pending Proceedings — Protection. 

In suc:h case the difficulties experienced by the telegraph company In 
its efforts to condemn any easement for its telegraph line held not to 
warrant an Injunction, restraining the railroad company from interfering 
with or obstructing telegraph company's use of the essement, of which it 
had pos^spssion, pending conderanation. 

5. Corporations <S=3.'iS2i/i, New, vol. 16 Key-No. Séries — Public Service Coe- 

POKATION — RiGIlTS. 

A public service corporation, oceupying property by permission or as a 
tenant, is subject to the same rules applicable to prlvate persons. 
a. Landlokd and Tenant @=3G1 — Licenses <S:=>51 — Estoppel to Dispute Tr- 
tle. 

One who occupies land perinissively or as a tenant is estopped from 
disputing the title of licensor or lessor, and must surrender possession 
before he can assume a hostile attitude. 
7. Eminent Domain <S=>1()7(4) — Compliance with Statutes. 

The right of eondemnation, being pur<>ly statutory, can be enforced only 
in compliance with the conditions and requirenients prescribed by statute. 

<g=>For other cases see same topic & KEY-NUMBER in ail Key-Numberea Dlgests & Indexes 



200 250 FEDERAL REPORTER 

Appeal f rom the District Court of the United States for the North- 
ern District of Georgia ; William T. Newman, Jiidge. 

Bill by the Western Union Telegraph Company against the Louis- 
ville & Nashville Railroad Company. From a decree striking an 
amendment from the bill, and dismissing the bill as araended (243 
Fed. 687), complainant appeals. Affirmed. 

Arthur Heyman, of Atlanta, Ga., and Wm. L,. Clay, of Savannah, 
Ga. (Rush Taggart and Albert T. Benedict, both of New York City, 
on the brief), for appellant. 

Henry C. Peeples, of Atlanta, Ga., and Henry L,- Stone, of Louis- 
ville, Ky., for appellee. 

Before WALKER and BATTS, Circuit Judges, and GRUBB, Dis- 
trict Judge. 

WALKER, Circuit Judge. This îs an appeal from a decree strik- 
ing an amendment to the plaintiff's (appellant's) bill, which was made 
under the leave granted by this court in disposing of a former appeal 
in the same case, and dismissing the bill as amended in so far as the 
allégations thereof refer to properties in or as to which this court de- 
cided that the original bill did not show that the plaintiiï had or has 
the rights or interests which it claimed and sought to hâve enforced. 
Western Union Telegraph Co. v. Louisville & Nashville R. Co., 238 
Eed. 26, 151 C. C. A. 102. This court ruled, as is shown by its opin- 
ion just referred to, that the bill as it was before it was amended 
stated no facts supporting the conclusion that the plaintiff, at the time 
the suit was brought, had any right to occupy or use any property of 
the défendant other than the lines of railway which the latter, in 
the year 1902, purchased from the Atlanta, Knoxville & Northern 
Railway Company. The évident purpose of granting to the plaintifif 
leave to amend its bill was to afford it the opportunity of stating facts 
and circumstances, if such existed, capable of supporting the conclu- 
sions asserted in the bill to the effect that before the bill was filed the 
plaintiff had acquired the right, existing when this suit was brought, 
to occupy and use properties of the défendant in Georgia other than 
that bought by it from the Atlanta, Knoxville & Northern Railway 
Company. The properties last mentioned will be referred to as the 
defendant's "new lines," ail of them having been acquired by the de- 
fendant after its above-mentioned purchase from the Atlanta, Knox- 
ville & Northern Railway Company. 

[1] If there existed any basis of fact to support the asserted claims 
of the plaintiff of the right to occupy and use the defendant's new lines, 
this could hâve been sufificiently shown by an amendment to the bill 
containing a short and simple statement of the ultimate facts upon 
which the plaintiff seeks relief in that regard, omitting any mère 
statement of évidence. Equity rule 2h (198 Fed. xxv, 115 C. C. 
A. xxv). The amendment which was filed was not such a plead- 
ing. It was a voluminous document, the copy of which, exclu- 
sive of the exhibits attached, fills 85 pages of the printed record 
before us. By far the larger part of it was made up of statements 
of law, statutory and customary, and argumentative expressions of a 



WESTERN UNION TELEGEAPH CO. V. LOUISVILLE & N. K. CO. 201 

multitude of légal conclusions, accompanied by copious références to 
and comments upon court décisions, not omitting insistence upon 
propositions which hâve been explicitly overruled, some of them by 
this court in disposing of the former appeal in this case, and others by 
the Suprenie Court of Georgia in décisions rendered in litigation be- 
tween the same parties, growing out of an attempt by the plaintifï, by 
proceedings instituted by it in a Georgia tribunal, after it gave notice 
of its désire or intention to terminate the agreement between it and 
the défendant, which was construed by this court when this case was 
hère before, to acquire by condemnation the right to occupy and use 
the defendant's properties in Georgia, which the plaintiff by this suit 
claims it already possessed before those proceedings and this suit were 
brought. The statements of the matters just enunierated were out of 
place in a pleading, the function of which is to raise or meet issues 
of law or of fact. Much, if not ail, of it could properly bave been 
stricken out as redundant or impertinent matter. Equity rule 21 (198 
Fed. xxiv, 115 C. C. A. xxiv). 

[2-4] An examination of the amendment with a view of ascertain- 
ing what averments of facts it contains, made unduly burdensome 
by the injection of the matters just mentioned, has not led to the dis- 
covery of any such averments which négative the conclusions that the 
présent or former occupation and use by the plaintifï of the whole or 
any part of the defendant's new lines were under and by virtue of 
the agreement between the parties, which was referred to and con- 
strued in this court's former opinion, and that at the time this suit was 
brought the plaintifï was without right to continue such use or occu- 
pation. In other words, the bill as it has been amended still fails to 
show that the plaintiflf is entitled to ail or any part of the rights and 
easements affecting the defendant's new lines in Georgia, which were 
claimed by the original and amended bill. 

The amendment discloses the folio wing facts, which were not al- 
leged by the original bill: 

In January, 1912, after the giving by the plaintiff of notice to the 
défendant of the désire and intention of the former to terminate the 
above-mentioned agreement between them, but before the termination 
of that agreement, and while the plaintiff was still occupying and using 
the defendant's properties under that agreement, it instituted proceed- 
ings for the acquisition by condemnation, under a Georgia statute, of 
so much of the defendant's railroad rights of way in Georgia as was 
and is necessary for the plaintiff's use for the purpose of construct- 
ing, maintaining, and operating its lines of telegraph thereupon and 
therealong ; the location of the right of way sought to be so acquired 
being substantially the same as that which then was and is now oc- 
cupied by the plaintiff's telegraph lines along the defendant's railroads 
in Georgia. The method of instituting such proceedings prescribed 
by the applicable Georgia statute (Code of Georgia 1911, § 5206 et seq.) 
is by the party seeking to condemn, if an agreement with the owner 
upon the compensation to be paid is not made, serving upon the owner 
a notice describing the property or franchises and the amount of in- 
terest therein sought to be condemned, fixing the time when the hear- 



202 250 FEDERAL KBPORTEU 

ing will be had on the premises, giving the name of the assessor se- 
lected by the party seeking condemnation, and requesting the owner 
to select an assessor. If the owner, after being served with such no- 
tice, fails to select an assessor, the ordinary of the county where the 
property is situated, or the franchise sought to be condemned is used, 
is required to select an assessor for the owner, and the two assessors 
so selected select a third one. Such assessors, after hearing évidence, 
assess the value and damages, and make a finding or award, which 
is required to be filed and recorded in the office of the clerk of the su- 
perior court of the county. Provision is made for either party, if 
dissatisfied with the award made, appealing from the award to the 
superior court, in which, following the taking of such appeal, an is- 
sue is required to be made and tried by a jury as to the value of the 
property taken or the amount of damage done. 

The plaintiff instituted condemnation proceedings pursuant to the 
statute referred to. The défendant did not name an assessor, but, 
shortly after the institution of the condemnation proceedings, brought 
a suit in the superior court of Fulton county, Ga., to enjoin those pro- 
ceedings. A ground stated for granting the injunctive relief sought 
by the défendant was that it desired to bave a telegraph line upon its 
rights of way, and upon the rights of M-ay and in the location used by 
the plaintiff, and sought to be acquired by it by condemnation, and 
that the right of the défendant was paramount and superior to any 
right of the plaintiff to acquire the easements and rights of way which 
it was then using. The superior court denied the injunction sought in 
that suit. It was then by appeal carried to the Suprême Court of 
Georgia, which court reversed the judgment of the superior court, 
holding that the plaintiff was subject to be enjoined from condemning 
the route over the defendant's line which the latter had selected in 
good faith for use in a telegraph business of its own. Louisville & 
Nashville R. Co. v. Western Union Telegraph Co., 138 Ga. 432, 75 
S. E. 477. 

After the rendition of this décision the plaintiff, in November, 1912, 
sought to amend its condemnation proceeding by shifting the location 
of the easement desired to the opposite side of the defendant's right 
of way. By an amendment to its bill or pétition in the above-men- 
tioned injunction suit the défendant sought an injunction restrain- 
ing the plaintiff from proceeding with the condemnation sought under 
or by virtue of the above-mentioned amendment of the condemnation 
proceeding. That case again went by appeal to the Suprême Court of 
Georgia, and on September 20, 1914, that court in that case decided 
that, under the law of Georgia a condemnation proceeding cannot be 
amended. 142-Ga. 531, 83 S. E. 126. On April 5, 1915, the plaintiff 
dismissed its condemnation proceedings against the défendant, and, 
not having instituted any other such proceedings, on the same day filed 
its original bill in this case. We are not advised of any authoritative 
décision of a Georgia court which indicates that, at any time since the 
occasion arose for the plaintiff to acquire a new right to use in its 
telegraph business properties of the défendant included in its new lines 
in Georgia, the plaintiff could not hâve acquired by condemnation such 



WESTERN UNION TELEGKAPH CO. V. LOUISVILLE & N. K. CO. 203 

rights and easements in those properties as were required for the 
continued opération of its telegraph business on and over such new 
lines. 

The following is a statement of some of the features of the sit- 
uation existing at the time this suit was brought, most of the features 
mentioned being disclosed by affirmative averments made in the bill 
as it has been amended, and the remainder being such as, in the absence 
of averments show^ing that the facts were différent, may be presumed 
to hâve existed: 

The plaintiff commenced to make use of the defendant's new lines 
in carrying on the former's telegraph business only after acquiring, by 
express written contract between it and the défendant, the right or 
privilège of doing so for a limited period of time, which was subject 
to be shortened at the élection of either of the parties to that contract, 
manifested in a manner specified in the contract. By the voluntary 
act of the plaintiff alone its rights conferred by that contract were 
terminated by its giving the défendant written notice, dated August 
11, 1911, that one year thereafter said contract would be terminated. 
It is not made to appear by averment of facts or circumstances that 
the défendant in any other way than by the making of that contract 
conferred upon the plaintiff any right to occupy or use the former's 
new lines or anything included therein, nor that the plaintiff otherwise 
than by that contract acquired any right or easement in those lines or 
any part of them. The volimtary termination by the plaintiff of the 
only right it possessed to occupy and use the defendant's new lines 
was followed by the former making an attempt to acquire by condem- 
nation the right to continue to use a part of those lines which, under 
the law of Georgia applicable in the circumstances existing, it was not 
entitled to acquire in that way. After the plaintiff's lack of right to 
acquire by condemnation what it sought so to acquire was judicially 
determined, it sought, in a manner not permitted by the law of Georgia, 
to acquire by condemnation the right to occupy and use a part of the 
defendant's new lines other than the part thereof originally unsuccess- 
fully so sought to be acquired. This effort, which failed only because 
of the improper method pursued in making it, was not followed by 
any attempt by the plaintiff to avail itself , in the manner prescribed, of 
the right given to it by the law of Georgia of acquiring by condemna- 
tion such rights and easements in the defendant's new lines in Georgia 
as were required for the continued opération thereon and thereover 
of the plaintiff's telegraph business. 

So long as the plaintiff was making any kind of an attempt to 
acquire by condemnation a right to occupy and use property of the 
défendant, and up to the time of the filing of the bill, the défendant, 
so far as appears, took no action to enforce its demand upon the 
plaintiff that the latter vacate the former's rights of way, buildings, 
offices, stations, and premises, and remove therefrom its telegraph 
pôles and wires, and other properties, though the abortive condem- 
nation proceedings instituted by the plaintiff were pending for several 
years after, by its own voluntary act, the only right it ever had to occu- 
py and use defendant's new lines had ceased to exist. AU effort by 



204 250 FEDERAL REPORTER 

the plaintiff to acquire by condemnation such rights or easements in 
the defendant's new lines as, in the circumstances existing, could be 
so acquired was abandoned without ever having been made in the 
manner required by law. It is not made to appear that the plaintiff, be- 
fore bringing this suit, exhausted the légal remédies which were avail- 
able, nor that, in the situation disclosed, those remédies were inadé- 
quate. 

It was under such circumstances that this suit was brought, having 
for its alternative objects either an adjudication that the plaintiff 
already possesses the right to continue to occupy and use the defend- 
ant's properties as it was occupying and using them at and prior to the 
bringing of the suit, or, in the event of the court's determining that 
the plaintifï has not acquired the rights mentioned, that it adjudge that 
the plaintifï is entitled to acquire those rights and détermine the 
amount of compensation to be paid to the défendant therefor, or, if it 
shall be adjudged that the amount of compensation to be paid cannot 
properly be determined in this cause, that the plaintifï be permitted to 
institute apprbpriate proceedings for the purpose of fixing and deter- 
mining such compensation, and that, pending such proceedings, the 
défendant be restraihed and enjoined from interfering with, obstruct- 
ing, or impeding the enjoyment by the plaintiiï of the use for its tele- 
graph business of the defendant's rights of way and premises. 

The conclusion already has been stated that the bill as amended 
does not show that the plaintiff is entitled to hâve granted its fîrst 
above-mentioned prayer for relief. As the bill as amended does not 
négative the exercise by the plaintiff in good faith of its paramount 
preferential right to use for a telegraph business of its own that part 
of its new lines now and formerly used by the plaintiff in conducting 
the latter's telegraph business, the granting of the second alternative 
prayer for relief would involve a détermination that the plaintiff 
can, by means of the judgment or decree of the court, acquire upon 
payment of compensation fîxed by the court, or pursuant to its order, 
what the law of Georgia does not permit it to acquire by condemna- 
tion. The granting of the third and last alternative spécial prayer for 
relief — which also seeks a récognition by the court of the asserted 
right of the plaintiff to acquire, under or by virtue of the court's judg- 
ment or decree, the right to continue to use that part of the defend- 
ant's new Unes now and formerly used by the plaintiff for its telegraph 
business — would amount to the court protecting the plaintiff in a con- 
tinuation of its occupation and use of the defendant's new lines years 
after it volùntarily relinquished ail rights in or to those properties it 
ever possessed, and postponing the exercise by the défendant of its 
right of resuming possession and control of its own property for such 
period of time as may be required to enable the plaintiff to institute 
and prosecute to a termination proceedings for the purpose of fixing 
and determining the compensation to be paid for property of the 
plaintiff of which by no applicable statute it is made subject to be di- 
vested in the manner prayed to be pursued. The seeking of such 
spécial relief in the circumstances disclosed indicates the assumption 
by the pleader that a court of equity, when applied to in behalf of 



WESTERN UNION TELEGRAPH CO. V. LOUISVILLE & N. R. CO. 205 

such a plaintiff as the one in this suit is, engaged and situated as that 
plaintiff was wlien this suit was brought, is empowered to efifect by 
its judgment or decree the involuntary expropriation of property in- 
terests and rights without a compliance with the conditions and pro- 
cédure prescribed by the only statute which gives the plaintiff the 
right to acquire the defendant's property by condemnation or invol- 
untary expropriation. We hâve not been convinced that the equity 
powers of the court include such a one. 

It is not questioned that an owner of property, as against another 
who, without right to do so, intrudes upon, occupies, and uses that 
property, may, by standing by and permitting such things to be donc, 
involving expenditures by the intruder in improving the property for 
the use for which it was taken, estop himself to recover possession of 
his property, or waive his right to relief for the wrong committed 
other than an award of compensation for the pecuniary loss or injury 
to which he is so subjected. Nor is it questioned that the fact that the 
intruder is a corporation engaged in a service in the continuous and 
uninterrupted rendering of which the public is interested, and tises the 
property so intruded upon and improved for the purposes of that serv- 
ice, is a circumstance properly to be considered in supporting the con- 
clusion that the owner has estopped himself to dispossess the intruder 
or waived his right to resort to remédies which otherwise would be 
available to him. 

The propositions just stated were applied in the case of New York 
City V. Fine, 185 U. S. 93, 22 Sup. Ct. 592, 46 L. Ed. 820. In that case 
it was held that the plaintiffs — property owners having the right to 
prevent an interruption of the natural flow of water through their 
farms by the défendant, which had not acquired the right to cause 
such interruption — lost their right to prevent such interruption by so 
dealing with the défendant while it was effecting such interruption, 
and incurring heavy expense in so doing, as to show that they were 
seeking compensation for the injuries they would sustain, and were 
not insisting upon a right to hâve the work abandoned. The instant 
case is not such a one. So far as appears, the défendant has not con- 
sented to or acquiesced in the plaintiff 's entry upon and use of the 
former's new lines, except in so far as such entry and use for a limited 
period of time was consented to and provided for by the written con- 
tract already several times mentioned. The plaintiff's occupation and 
use, so far as they hâve been consented to or acquiesced in by the de- 
fendant, hâve been permissive, secured to it by a contract, from the 
very existence and terms of which it is to be implied that, upon the 
expiration of the period for which the occupation and use were con- 
tracted for, the right would accrue to the défendant to come into pos- 
session and control of its properties, up to that time rightfully occu- 
pied and used by the plaintiff. Since the termination by the plaintiff's 
voluntary act of the rights it formerly had, the défendant has been 
continuously asserting its right to repossess itself of its own prop- 
erty, and has had no dealing with the plaintiff which îndicated that it 
did not insist upon that right, or that it consented to a continuance of 
the occupation and use of its properties upon the payment of compen- 
sation therefor. 



206 250, FEDERAL EEPORTEB 

[5^6] We do not understand that the fact that the occupant of 
property by permission or as a tenant is a public service corporation 
exempts it from the opération of rules of lavv which are applicable 
wlien the respective • parties, brought into such a relation with référ- 
ence to property are strictly private ones. It is a f amiliar rule applica- 
ble to such a relation that one who occupies permissively or as a tenant 
is estopped from disputing the title of his lessor or licensor, that the 
former must fîrst surrender possession before assuming an attitude of 
hostility to the latter's titie, that a possession cannot at one and the same 
time be both permissive and adverse, and that a permissive possession 
cannot be changed into an adverse or hostile one without notice to the 
party who occupies the position of lessor or licensor. Duncan v. Guy, 
159 Ala. 524, 49 South. 229. Contentions advanced in behalf of the 
plaintifï in this case cannot be sustained, without deciding that it is 
exempt from the opération of the rule mentioned. 

[7] The averments of the bill as amended indicate the final vol- 
untary abandonment by the plaintiiï of any effort or purpose to ac- 
quire by condemnation under the Georgia statute such rights in the de- 
fendant's new lines as, under existing circumstances, could be acquired 
in that way. That right is a purely statutory one, and the enf orcement 
of it is subject to a compliance with the conditions and requirerrients 
prescribed by the statute. It is, to say the least, questionable whether 
that statutory right could be enforced in such a suit as the instant one ; 
the initial proceeding required when condemnation is sought not being 
a suit inter partes before a judicial tribunal, no such suit coming into 
existence until after an award by assessors has been made and an ap- 
peal therefrom taken, and the initial steps prescribed being such as 
cannot be taken by or in the court in which this suit was brought. 
But we do not understand that it is a purpose of this suit to secure the 
enforcement of that statutory right or to afiford the plaintifï further 
opportunity to enf orce it, in the meantime protecting it in the continu- 
ance of the occupation and use of the defendant's new lines which 
commenced under and by virtue of the terminated contract. 

The asserted right by this suit sought to be enforced is that of con- 
tinuing the just-mentioned occupation and use of the defendant's new 
lines, a right which, under circumstances which, the contrary not 
appearing, may be presumed now to exist, the plaintifï cannot acquire 
under the Georgia condemnation statute, as that statute has been 
construed in a case to which the plaintifï and the défendant in this suit 
were parties. This suit is an efïort by the plaintifï to keep what it 
holds — not one to get what it can under the Georgia condemnation 
statute. It is like the case of Western Union Telegraph Co. v. Penn. 
R. R., 195 U. S. 540, 572, 573, 25 Sup. Ct. 133, 49 L. Ed. 312, 1 Ann. 
Cas. 517, in that it invokes the aid of the court to enable the plaintiff 
to continue to occupy and use the defendant's railroad without its con- 
sent, or that of some predecessor in title. It was decided in that case 
that this could not be donc, except under the power of eminent do- 
main and upon payment of compensation. It appears that there was 
no eminent domain statute that might hâve affected the resuit in that 
case. In the instant case the plaintifï has not, in the way prescribed, 



WESTERN UNION TELEGEAPH CO. V. NASHVILLE, C. & ST. L. ET. 207 

sought the relief available to it under an existing condemnation stat- 
ute, and, without having the right to do so, is trying to keep what, 
under existing circumstances, it cannot acquire by condemnation. So 
far as results are concerned, the différence between the two cases does 
not seem to be a material one. 

We are not of opinion that the averments of the bill as amended 
show that anything has happened which had the eflfect of conferring 
upon the plaintiff the rights which it asserts. Nor are we of opinion 
that, snch rights not having been acquired as a resuit of any conduct 
of or dealing between the parties, it is within the power of the court 
as a court of equity to divest or expropriate involuntarily property 
rights or interests of the défendant and vest them in the plaintiff upon 
the latter paying such compensation as the court may adjudge to be 
proper and commensurate with the loss or injury resulting to the for- 
mer. The conclusion is that upon no ground urged or disclosed was 
the decree appealed from so erroneous as to be subject to reversai. 

That decree is affirmed. 

BATTS, Circuit Judge, not participating in the décision. 



WESTERN UNION TELEGEAPH CO. v. NASHVILLE, C. & ST. L. RY. 

(Circuit Court of Appeals, Fifth Circuit. April 2, 1918.) 

No. 3138. 

Appeal from the District Court of the TTnited States for the Northern 
District of Georgia. William T. Newman, Judge. 

Bill by the Western Union Telegraph Company agalnst the Nashville, 
Chattanooga & St. Ivouis Raihvay. From the decree dismisslng the blU (243 
Fed. 6!>4), complainant appeals. Affirmed. 

. William L. Clay, of Savannah, Ga., and Arthur Heyman, of Atlanta, Ga. 
(Rush Taggart and Albert T. Benedict, both of New Yorlt City, on the brief), 
for appellant. 

Henry C. Peeples and John L. Tye, both of Atlanta, Ga., and Claude Waller, 
of Nashville, Tenn., for appellee. 

Before WALKER and BATTS, Circuit Judges, and GRUBB, District Judge. 

WALKER, Circuit Jiidixe. There are différences between this case and the 
case of Western Union Telegraph Co. v. I.ouisville & Nashville Rallroad Ce, 

250 Fed. 199, C. O. A. — , Circuit Court of Appeals, Mfth Circuit, présent 

term ; but tlie similarities between the two cases are sucli as to make the 
opinion rendered in the last-mentioned case a siifiicient disclosure of the 
grounds relied on to support the conclusion reached in this case that it was 
not réversible error to dismiss tlie plalntift's (appellant's) bill of complaint as 
ît was amended. 

The decree to that effect is affirmed. 

BATTS, Circuit Judge, not participating In the décision. 



208 250 FEDERAL REPORTER 

WESTERN UNION TELEGEAPH CO. V. ATLANTA & W. P. R. CO. 

(Circuit Court of Appeals, Fiftli Circuit. April 2, 1918.) 

No. .3136. 

Appeal from tlie Dl.strict Court of tlie United States for the Nortliern Dis- 
trict of Georgla ; William T. Newinan, Judge. 

Bill by the Western Union Telegraph Company against the Atlanta '& West 
Point Railroad Company. From a decree dismissiug the bill (243 î'ed. 685), 
eomplaiuant appeals. Attirmed. 

William L. Clay, of Savannah, Ga. (Rush Taggart and Albert T. Benedict, 
both of New York City, on the brief), for appellant. 

Léon Weil, of Montgomery, Ala., and Saunders McDaniel, of Atlanta, Ga., 
for appellee. 

Betore WALKER and BATTS, Circuit Judges, and GRUBB, District Judge. 

WAIiKER, Circuit Judge. Following rulings made in the cases of Western 
Union Telegraph Co. v. Louisville & Nashville Railroad Co., 250 Fed. 199, — 

C. C. A. , and Western Union Telegraph Co. v. Nashville, Chattanooga & 

St. Louis Rallway, 250 Fed. 207, C. C. A, , Orcuit Court of Appeals, 

Fifth Circuit, présent term, the decree disniissing the plaintifï's bill of com- 
plaint as It Was araended is affirmed. 

BATTS, Circuit Judge, not participatlng in tlie décision. 



DAVID et al. v. YOUNGKEN et al. 
(Circuit Court of Appeals, Eighth Circuit. April 3, 1918.) 

No. 4877. 

Indians ®=5l5(2) — Allotmests — Statutes— Applicability. 

Act April 26, 1900, e. 1876, § 22, 34 Stat. 145, declaring that ail convey- 
ances by heirs who are full-blood Indians are to be subject to the approval 
of the Secretary of the Interior, under such rules and régulations as he 
may prescribe. applies where the allotment was not made to an Indian 
then living, but in the name of one who had died, for the benefit of his 
heirs. 

Appeal from the District Court of the United States for the Eastern 
District of Oklahoma ; Ralph E. Campbell, Judge. 

Suit by Nellie David and others against J. H. Youngken, individually 
and as administrator of the estate of John D. Scott, deceased, and 
others. From a decree (235 Fed. 621) for défendants, plaintiffs ap- 
peal. Reversed and remanded. 

Archibald Bonds, Sp. Asst. U. S. Atty., of Muskogee, 0kl. (D. H. 
Linebaugh, U. S. Atty., and Paul Pinson, Sp. Asst. U. S. Atty., both 
of Muskogee, Okl., on the brief), for appellants. 

L,. J. Roach, of Muskogee, Okl. (J. B. Campbell, of Muskogee, Okl., 
guardian ad litem, on the brief), for appellees. 

Before HOOK, SMITH, and STONE, Circuit Judges. 

HOOK, Circuit Judge. This suit involves the construction of sec- 
tion 22 of the act of April 26, 1906 (34 Stat. 137), imposing certain 

(^z=5For other cases see same topic à KEY-NUMBER in aU Key-Numbered Digests & Indexes 



HARKIS V. BELL 209 

restrictions upon tlie aliénation by heirs of lands allotted to members 
of the Five Civilized Tribes of Indians. The facts are as follows: 
Stephen David was an enrolled fuil-blood Cherokee Indian. He died 
intestate September 20, 1903, without having selected or received his 
allotment. He left surviving him a widow, five adult daughters, and 
a miner grandson, the issue of a deceased daughter. The widow and 
one daughter were of three-quarter blood, and the others, including 
the grandson, were full-blood Cherokees. May 28, 1907, the land in 
controversy was selected by the administrator as part of the deceased's 
allotment, and a patent was afterwards issued in his name. The heirs 
made conveyances which, if valid, resulted in vesting the title in ap- 
pellee, Youngken, with certain rights in other parties that need not 
now be stated in détail. The conveyances by the full-blood heirs were 
not approved by the Secretary of the Interior. The last clause of sec- 
tion 22 of the act of 1906 provides : 

"AU conveyances made under tlils provision by lieirs wlio are full-blood 
Indians are to be subject to the a'^roval of the Secretary of the Interior, 
under such rules and régulations as he may prescrlbe." 

The précise question in the case is whether the section applies where 
the allotment was made, not to an Indian then living, but in the name 
of one who had died, and for the benefit of his heirs. The trial court 
held it was not applicable, and entered a decree for Youngken. A like 
décision was made by this court in a similar case. Sunday v. Mallory, 
150 C. C. A. 408, 237 Fed. 526. The Suprême Court has recently held 
otherwise. Brader v. James, 246 U. S, 88, 38 Sup. Ct. 285, 62 L,. 

Ed. (March 4, 1918) ; Talley v. Burgess, 246 U. S. 104, 38 Sup. 

Ct. 287, 62 L. Ed. (March 4, 1918). 

The decree is reversed, and the cause is remanded for further pro- 
ceedings in accordance with this opinion. 



HARRIS et al. v. BELI. et al. 

(Circuit Court of Appeals, Eighth Circuit. Aprll 30, 1918. 

No. 4911. 

1. Indians <g=;15(2) — Indian Lands — ^,\lt.ottees — Restrictions. 

Full-blood heirs of a deceased eni-oUed citizen of one of the Five Civi- 
lized ïrJbes, on whose account an allotment was selected after his death 
by an administrator or by the Dawes Commission, take sub.lect to the 
restriction in Act Aprll 26, 1906, c. 1876, 34 Stat. 145, § 22, declarlng that 
ail conveyances made therevnider b.y heirs who are full-blood Indians are 
subject to tlie a])proval of the Secretary of the Interior. 

2. Ikdiass ©=315(2) — Lands — Aliénation iîy Heiiîs — Descent. 

Wiiere. under Original Creek Agreoment (Act March 1, 1901, c. 676) § 
28, 31 Stat. 869, 870, Supplemental Creek Agreement (Act Juue 30, 1902, 
c. 1323) § 7, 32 Stat. 501, and Approprisitlon Act March 3, 1905, c. 1479, 33 
Stat. 1048, an allotment was made by tbe Dawes Commission in the name 
of a full-blood Creek Indian, born In 1903, enrolled on Juiie 10, 1905, who 
died on Jnne 22d of that year, the provisions of Act Aprll 26, 1906, §§ 5, 
19, Impo.slng restrictions on aliénations by allottees, do not apply ; but 
section 22, declaring that ail conveyances made by heirs who are full- 

^zsFor other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes- 
250 F.— 14 



210 250 FEDERAL REPORTEE 

blood Indians shall be subject to approval of the Secretary ôf the Interior, 
governs. 

3. Indians ®=al5(2) — Lands — Aliénation — Statutes— Construction. 

Act May 27, 1908, c. 199, § 9, 35 Stat. 315, declaring that the death et 
any allottee of the Five Oivilized Tribes shall operate to remove ail re- 
strictions upon the aliénation of the allottee's land, but that no convey- 
ance of any interest of any full-blood Indlan heir shall be. valid, unless 
approved by the court havlng jurisdlctlou of the settlement of the estate of 
such allottee, bas a prospective effect, and is inapplicable to couveyances 
made before its enactment; hence the Secretary of the Interior may, 
after the passage of Act May 27, 1908, approve, under Act April 26, 1906, 
§ 22, a previously executed conveyauce by a full-blood Indian heir. 

4. Statittes <S=5l62 — Repeal of Spécial by Gênerai, Act. 

Spécifie législation in relation to a particular class or subject is not 
afCected by gênerai législation in regard to many classes or subjects, of 
which that covered by the specifle législation is one, unless tlie gênerai 
législation is so répugnant to the spécial that the legislators must be 
presumed to bave intended thereby to modify or repeal it. 

5. Statutes ©='181(2) — Constbuction. 

Every statute should hâve a reasohable, sensible construction, In préfér- 
ence to one which renders it, or a substantial part of it, useless or dele- 
terious. 

6. Statutes <S=>212 — Intent of Législature — Presumption. 

ïhe intention of the législative body must be presumed to hâve been to 
beneflt, not to injure, those interested in the subject of the law. 

7. Indians ®=>28 — Lands— Aliénation by Heiks — Jurisdiction oe Courts. 

Act May 27, 1008, §1 6, déclares that the persons and property of minor 
allottees of the Five Civil ized Tribes shall, except as otherwise speclfleally 
provided by law, be subject to the jurisdiction of the probate courts of the 
State of Oklahoma, while section 9 déclares that the death of any allottee 
of the Five Civilized Tribes shall operate to remove ail restrictions upon 
the aliénation of such allottee's land, but that no conveyanee by any full- 
blood Indian heir shall be valid, unless approved by the court having ju- 
risdiction of the settlement of the estate of the allottee. An Indian, in 
whose name an allotment was made after his death, resided and died in 
that part of the Indian Territory which became, on création of the state 
of Oklahoma, Wagoner county, and after that date the county court of 
Wagoner county had power, under Comp. Laws Okl. 1909, § 5142, to ac- 
quire jurisdiction of the settlement of his estate. Tlie land allotted was 
situated, and the minor heirs to whom it in part descended resided, in 
that part of the Indian Territory which, upon statehood, became Okmulgee 
county. Prior to statehood, the United States District Court, which had 
plenary jurisdiction of the settlement of the estate of the deceased and 
the guardlanship of the minors, appolnted an administra tor of the estate 
and a guardian for the minors. Upon statehood, jurisdiction of the guar- 
dlanship proceedings, of the subject-matter, and of the parties thereto 
passed to the county court of Okmulgee county, and that tribunal ordered 
and conflrmed the sale and conveyanee of the interests of the minor heirs. 
Held, that the sale and conveyanee were valid without the concurrence 
of the county court of Wagoner county. 

8. Indians ®=»15(1) — Conveyance. 

Where the conveyances by the several heirs of a deceased Indian, In 
whose name an allotment was made after his death, passed the entlre in- 
terest of ail of the heirs, none of the heirs hâve any interest which will 
allow them to attack the décision of the trial court as to the share de- 
scending to each heir. 

Appeal f rom the District Court of the United States for the Eastern 
District of Oklahoma ; Ralph E. Campbell, Judge. 

(gssFor other cases see same topic & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexes 



HAREIS V. BELL 211 

Suit by Annie Harris, formerly Annie Francis, and others, against 
Harry H. Bell and others. From a decree for défendants (235 Fed. 
626), complainants appeal. Affirmed. 

James C. Davis, of Muskogee, Okl. (R. C. Allen, of Muskogee, Okl, 
on the brief), for appellants. 

P. J. Carey, of Muskogee, Okl., for guardian ad litem. 

Belford & Hiatt, of Okmulgee, Okl., for appellee Womack. 

Frank F. Lamb, of Okmulgee, Okl., for appellee Gill. 

William M. Matthews. of Okmulgee, Okl. (John S. Kirkpatrick, R. 
C. Martin, and H, M. Kirkpatrick, ail of Idabel, Okl, and George S. 
Ramsey, of Muskogee, Okl., on the brief), for other appellees. 

Before SANBORN and SMITH, Circuit Judges, and TRIEBER, 
District Judge. 

SANBORN, Circuit Judge. This case présents many questions. 
The first is the character and extent of the restrictions on the aliéna- 
tion of 160 acres of land, which was formerly the property of the Creek 
Tribe, and was, on December 4, 1907, allotted by the Dawes Commis- 
sion in the name of Freeland Francis, a new-born full-blood Creek In- 
dian, who was born on April 30, 1903, was enrolled on June 10, 1905, 
and died on June 22, 1905. The right of Freeland Francis to an allot- 
ment, and to the land when allotted, descended under the Creek Agree- 
ments and the acts of Congress to his mother, Annie Francis (who by 
marriage bas become Annie Harris), his brother Amos Francis, his sis- 
ter Elizabeth Francis, and his half-brother Mack Francis. Annie, 
Amos, and Elizabeth are full-blood Creek Indians ; Mack is a half- 
blood. On January 15, 1908, Annie made a deed of her interest in 
the land to Laura É. McGinnis, which was approved by the Secretary 
of the Interior on July 6, 1910, and the respondents H. L. Lightsey 
and John R. Taylor hâve succeeded to the right conveyed by that deed. 
On January 22, 1912, W. J. Cook, as guardian of Amos and Elizabeth, 
pursuant to orders of the county court of Okmulgee county, Okl., made 
his guardian's deed of their interest in the land to the respondents 
Lightsey and Taylor. The appellants Annie, Amos, and Elizabeth 
claim that thèse deeds are void on account of restrictions on their pow- 
er to alienate thèse lands by sections 5, 19, and 22 of the Act of April 
26, 1906, c. 1876, 34 Stat. 137, and section 9 of the Act of May 27, 
1908, c. 199, 35 Stat. 312. 

[1] The court below was of the opinion that the appellants' right 
to alienate this land was exempt from the restrictions imposed by thèse 
acts, and that was the opinion of this court in a like case. Sunday v. 
Mallory, 150 C. C. A. 408, 237 Fed. 526. The Suprême Court, how- 
ever, on March 4, 1918, decided, in cases not distinguishable from that 
hère in hand, that full-blood heirs of a deceased enrolled citizen of one 
of the Five Civilized Tribes, on whose account an allotment was se- 
lected after his decease by an administrator or by the Dawes Commis- 
sion, are subject to the restriction in section 22 of the Act of April 26, 
1906, to the eflfect that ail conveyances made thereunder by heirs who 
are full-blood Indians are subject to the approval of the Secretary of 
the Interior. 34 Stat. 145 ; Brader v. James, 246 U. S. 88, 38 Sup. 



212 250 l^EDEKAL REPORTER 

Ct. 285, 62 L. Ed. ; Talley v. Burgess, 246 U. S. 104, 38 Sup. Ct. 

285, 62 L. Ed. . And this court has followed that décision. David 

V. Youngken (filed April 3, 1918) 250 Fed. 208, — ■ C. C. A. . 

[2] In view of thèse décisions, the question arises whether or not 
Annie's deed, made on January 15, 1908, and approved by the Secre- 
tary of the Interior on July 6, 1910, constituted a lawful conveyance. 
Counsel for the appellants insist that it did not: First, because, as 
they insist, she and the brothers and sisters of Freeland Francis took 
as allottees, and not as heirs, and she and they were prohibited from 
aHenating their interests in the land by sections 5 and 19 of the Act of 
April 26, 1906, 34 Stat. 138, 144; and, second, because the power of 
the Secretary to approve her deed under section 22 of that act was re- 
voked by the Act of May 27, 1908. 35 Stat. 312, 315, § 9. But the 
first contention is inconsistent with the décision of the Suprême Court 
in Brader v. James, and of this court in David v. Youngken, cited 
above. In those cases the Suprême Court and this court had before 
them the question what restrictions were imposed by the Act of April 
26, 1906, upon the aliénation of their lands by fuU-blood descendants 
of deceased Indians in whose names those lands had been selected and 
allotted after their death, and they called such descendants heirs, and 
held that the restrictions imposed by section 22 governed their right of 
aliénation. Moreover, Congress has persistently kept separate and im- 
posed différent restrictions upon the aliénation of those to whom lands 
were allotted while they were living (Original Creek Agreement of 
March 1, 1901, c. 676, 31 Stat. 861, 863, § 7; Supplemental Creek 
Agreement, Act of June 30, 1902, c. 1323, 32 Stat. 500, 503, § 16; Act 
of April 26, 1906, 34 Stat. 144, § 19), and by the heirs of those deceased 
Indians in whose names lands were selected and allotted after their 
death (Original Creek Agreement, 31 Stat. 869, 870, § 28; Supplemen- 
tal Creek Agreement, 32 Stat. 50O, 501, § 7; Act of March 3, 1905, 
c. 1479, 33 Stat. 1048, 1071). By the acts first cited restrictions were 
placed upon the aliénation of their lands by the members of the first 
class, but no restrictions upon the aliénation of their lands by the mem- 
bers of the second class were imposed by any act of Congress prior to 
the Act of April 26, 1906. Skelton v. Dill, 235 U. S. 206, 207, 35 Sup. 
Ct. 60, 59 D. Ed. 198. The appellants in this case are members of the 
second class. They obtained their title under section 28 of the Origi- 
nal Creek Agreement, section 7 of the Supplemental Agreement, and 
the provision of the Appropriation Act of March 3, 1905, 33 Stat. 1048, 
1071, to the effect that the Dawes Commission might enroll children 
born subséquent to May 25, 1901, but prior to March 4, 1905, and liv- 
ing on the latter date, to Indians whose enrollment had theretofore 
been approved by the Secretary, and might enroll and make allotments 
to such children. Freeland Francis was one of thèse new-born citizens. 

The acts of Congress relating to this class of citizens in effect pro- 
vide that the lands and moneys to which such citizen would hâve been 
entitled if living shall descend to his heirs according to the applicable 
laws of descent and distribution, and shall be allotted and distributed 
to them accordingly. 31 Stat. 869, 870, § 28; 32 Stat. 500, 501, § 7; 
33 Stat. 1071. It was not as original members of the Creek Tribe, to 



HARKIS V. BELL 213 

whom allotments were made while they were living, or as heirs of such 
members. It was not as allottees, but as heirs of a new-born citizen, 
for whom no sélection or allotment had been made while he was liv- 
ing; it was not in their own right, but in his right, that the mother and 
the brothers and sister of Freeland Francis took this land. New the 
Act of April 26, 1906, préserves the distinction between the two classes 
made by the prior législation. It provides in section 19 (34 Stat. 144), 
with exceptions not relevant hère, that no fuU-blood Indian of either 
of the Five Tribes shall hâve power to alienate the lands allôtted to him 
for 25 years. It provides in section 22 that the adult heirs of any de- 
ceased Indian of either of said tribes, whose sélection has been made, 
may sell and convey the lands inherited from such décèdent, but that 
conveyances made under this provision by full-blood Indian heirs shall 
be subject to the approval of the Secretary of the Interior. Section 
19 applies to full-blood Indians to whom lands were allôtted while they 
were living, and it does not apply to their heirs or to the appellants. 
Section 22 applies to the heirs of deceased Indians whose sélections 
hâve been made. The appellants are such heirs, and their power of 
aliénation was not restricted by section 19 ; but the restriction thereon 
imposed by the Act of April 26, 1906, was imposed thereon and gov- 
erned exclusively by section 22 thereof. Nor is there anything in 
section 5 of the act inconsistent with this conclusion. The first posi- 
tion of counsel for the appellant hère is therefore untenable. 

[3] Counsel's second position, that the power of the Secretary of 
the Interior to approve and validate Annie's deed was revoked by the 
Act of May 27, 1908, is not more tenable. She made her deed on 
January 15, 1908, before the Act of May 27 of that year was passed. 
At that time she had the right to convey her land subject only to the 
approval of the Secretary, and he had the right and power to approve 
it under section 22 of the Act of April 26, 1906, and he did approve 
it on July 6, 1910. The Act of May 27, 1908, provides in section 9 
that the death of any allottee of the Five Civilized Tribes — 

"shall opertite to remove ail restrictions upon the aliénation of said allottee'y 
land: l'rovlded, that no conveyance of any interest of any full-blood Indian 
heir in such land shall be valid unless approved by the court having jurisdic- 
tion of the settlement of the estate of said deceased allottee." 35 Stat. 312, 
315. 

The argument is that the Act of May 27, 1908, repealed the provision 
of section 22 of the Act of April 26, 1906, regarding the approval by 
the Secretary and that this deprived him of the power to approve deeds 
made before the passage of the Act of May 27, 1908. But that act 
déclares that: 

"The Secretary of the Interior shall not be prohibited by this act from 
continuing to remove restrictions as heretofore, and nothing herein shall be 
constrned to impose restrictions removed from land by or under any law 
prior to the passage of this act." 35 Stat. 312. 

It makes an express amendment of the Act of April 26, 1906, 35 
Stat. 315, § 8, and it contains no express repeal of that act or of the 
provision of section 22 which empowered the Secretary to approve 
deeds of full-blood heirs. The rational and established rule is that 



214 250 FEDERAL REPORTER 

where the validity of conveyances of land is conditioned by the ap- 
proval of différent officers, or by différent restrictions at différent 
times, the law in force at the date of the deed détermines the restric- 
tion upon its vaHdity, and that where at that date a specified officer is 
empowered to approve and vaHdate it, he or his successor in office may 
lawfully do so after subséquent législation has conditioned the validity 
of like conveyances with the approval of a différent officer, or vv'ith 
différent restrictions, and the true construction of section 9 of the Act 
of May 27, 1908, is that it is prospective, and not rétrospective, in ef- 
f ect ; that it applies to conveyances made after its passage, and is in- 
applicable to those made before its enactment. Pickering v. Lomax, 
145 U. S. 310, 315, 12 Sup. Ct. 860, 36 L. Ed. 716; Lykins v. Mc- 
Grath, 184 U. S. 169, 172, 22 Sup. Ct. 450, 46 L. Ed. 485; United 
States v. Knight, 206 Fed. 145, 148, 124 C. C. A. 211 ; Harris v. Gale 
(C. C.) 188 Fed. 712, 716; MaHarry v. Eatman, 29 0kl. 46, 116 Pac. 
935, 941. And the décision is that Annie's deed was validated by the 
approval of the Secretary of the Interior on July 6, 1910, that it then 
became a légal conveyance of ail her interest in the 160 acres hère in 
controversy, and that thereupon it related back and took effect as of 
the date of its exécution. 

[4-7] The deed of the guardian of the minor heirs, Amos and Eliza- 
beth, was made on January 22, 1912, pursuant to an order of the 
county court of Okmulgee county, 0kl., to sell their interest in the 
land in controversy, and an order of that court confirming the sale and 
directing the guardian to convèy that interest, which was made on 
January 15, 1912. As this deed was made after the passage of the 
Act of May 27, 1908, its validity is subject to and must be determined 
by that act. The pertinent provisions thereof are : 

"That the jurisdiction of the probate courts of the state of Oklahoma 
over lands of mincirs and Incompétents shall be sub.1ect to the foregolng pro- 
visions," wliich provisions are not materlal to the Issues now under considér- 
ation, "and the term minor or minors, as used in this act, shall include ail 
maies under the âge of twenty-oue years and ail females under the âge of 
eighteen years," 35 Stat. 312, § 2. 

"That the persons and property of minor allottees of the Five Civilized 
Tribes shall, except as otherwise speclflcally provided by law, be subject to 
the jurisdiction of the probate courts of the state of Olvlahoma," and that 
the Secretary of the Interior may appoint local représentatives to investigate 
the administration and disposition by any guardian or curator of the estate 
of any minor, and in case of the dissipation, waste, or détérioration thereof 
through the carelessness of such guardian or curator to report the matter to 
the proper probate court, and to cause an Investigation thereof and the ap- 
plication of the proper remedy. 35 Stat. 313, § 6. 

"That the death of any allottee of the Five Civilisied Tribes shall operate- 
to remove ail restrictions upon the aliénation of said allottee' s land: Pro- 
vided, that no conveyance of auy interest of any full-blood Indian heir in 
such land shall be valld unless approved by the court having Jurisdiction of 
the settlement of the estate of said deceased allottee." 35 Stat. 315, § 9. 

Freeland Francis resided and died on June 24, 1905, in that part 
of the Indian Territory which, upon the création of the state of Okla- 
homa on November 16, 1907, became Wagoner county, and after that 
date the county court of Wagoner county had power to acquire juris- 
diction of the settlement of his estate. Compiled L,aws of Oklahoma 



KAUKI8 V. BELL 215 

1909, § 5142, p. 1158. The land which is the subject of this litigation 
was situated, and the minors resided, in that part of the Indian Terri- 
tory which, upon the création of the state of Oklahoma on Novem- 
ber 16, 1907, became Okmulgee county, and the county court of that 
county has had plenary jurisdiction of the guardianship of their per- 
sons and property since that date. Prior to the création of the state 
of Oklahoma, ail the lands now within Wagoner county and ail the 
lands within Okmulgee county were within the Western district of 
Oklahoma, and the United States Court for the Western District of 
Oklahoma had plenary jurisdiction of the settlement of the estate of 
Freeland Francis and of the guardianship of the minors Amos and 
Elizabeth. It had exercised that jurisdiction by appointing William 
J. Cook administrator of the estate of Freeland Francis, and by ap- 
pointing him guardian of the persons and property of the two minors, 
before the state of Oklahoma came into existence. Mr. Cook had qual- 
ified in each capacity, and was discharging his duties therein, when 
the state was created. Upon the admission of the state the jurisdic- 
tion of the guardianship proceeding, of the subject-matter, and of 
the parties thereto passed, pursuant to the enabling act for Oklahoma 
and the Constitution and laws of Oklahoma, to the county court of 
Okmulgee county, and that court has since exercised jurisdiction there- 
over. No proceedings hâve ever been taken, so far as this record dis- 
closes, regarding the settlement of the estate of Freeland Francis, in 
the county court of Wagoner county. 

The objection to the validity of the guardian's deed is that it has 
never been approved, as required by section 9 of the act of 1908, by 
the county court of Wagoner county, which, after the admission of the 
state, might hâve taken jurisdiction of the settlement of the estate of 
Freeland Francis. But is the first proviso of that section applicable to 
a guardian's deed made by order of a county court which had plenary 
jurisdiction of the guardianship of the persons and of the disposition 
of the property of the minors by a provision of the same law? Was 
it the intention of Congress that the exercise by the county court of 
its undoubted jurisdiction of the guardianship of thèse minors and 
of the disposition of their estate should be futile, unless some other 
court of equal rank, which happened to hâve jurisdiction of the settle- 
ment of another Indian's estate, approved it? Is it not more probable 
that it was the intention of Congress to grant to a county court, which 
has jurisdiction of the guardianship of the persons and of the disposi- 
tion of the lands of minor heirs, unrestricted power to order the 
sale and conveyance of their property, and does not the true interpré- 
tation of the act exclude such sales and conveyances froni the applica- 
tion of the first proviso of section 9? 

This act must be read and construed in the light of the gênerai laws 
upon the same subject in force at the time of its passage. United 
States V. Trans-Missouri Freight Association, 58 Fed. 58, 7 C. C. A. 15, 
24 L. R. A. Th. Prior to its passage Congress had adopted the settled 
policy of conferring plenary jurisdiction of the disposition of leases of 
restricted lands of minors upon the trial courts in the Indian territory, 
and the jurisdiction of the approval of leases of such lands of adults up- 



216 250 FEDERAL EBPORTER 

on the Secretary of the Interior. A claim had been made that leases 
made by guardians of minors pursuant to orders of such courts were 
void, unless approved by the Secretary. This court remarked that there 
could be no full and complète jurisdiction of the guardianship of minor 
Indians, and of the leasing of their allotments, in a court whose judg- 
ments are reviewable and réversible by the officer of another depart- 
ment of the government, and after a review of ail the pertinent légis- 
lation held that the grant of jurisdiction to the trial courts excluded 
the power of the Secretary to approve or disapprove the leases they 
ordered to be made, and that his jurisdiction was limited to the ap- 
proval of leases of adults. Morrison v. Burnette, 154 Fed. 617, 620, 
83 C. C. A. 391, 394. It does not seem probable that the Congress 
intended by the act of 1908 to reverse this policy, which it had adopted 
and put in force, and to subject the décisions and orders of the trial 
courts which had jurisdiction to décide the advisability of and to or- 
der the sales and conveyances of the lands of minors upon full proof, 
to the action of other courts of equal rank which hâve no appellate ju- 
risdiction over the former courts, and no power to draw to themselves 
the évidence produced before such courts, or to review their action in 
the light of that évidence. 

It is a cardinal rule of the construction of statutes that spécifie lég- 
islation in relation to a particular class or subject is not affected by 
gênerai législation in regard to many classes or subjects, of which that 
covered by the spécifie législation is one, unless it clearly appears that 
the gênerai législation is so répugnant to the spécial législation that 
the legislators must be presumed to hâve intended thereby to modify 
or repeal it; but the spécial and the gênerai législation must stand 
together, the former as the law of the particular class or subject, and 
the latter as the gênerai law upon other subjects or classes within its 
terms. State v. Stoll, 17 Wall. 425, 436, 21 L. Ed. 650; Washington 
V. Miller, 235 U. S. 422, 427, 428, 35 Sup. Ct. 119, 59 L. Ed. 295; 
Priddy v. Thompson, 204 Fed. 955, 958, 959, 123 C. C. A. 277, 280. 
281 ; Board of Commissioners v. ^tna Life Ins. Co., 32 C. C. A. 585, 
590, 90 Fed. 222, 227; Christie-Street Commission Co. v. United 
States, 136 Fed. 326, 333, 69 C. C. A. 464, 471. 

Section 6 of the act of 1908 provides for the minor al!otte«s and 
their property. It déclares that the persons and property of minor a!- 
lottees of the Five Civilized Tribes shall be subject to the jurisdiction 
of the probate courts of the state of Oklahoma. The proviso of sec- 
tion 9 by its terms treats of ail full-blood Indian heirs of allottees 
of the Five Civilized Tribes, including both adults and minors. It 
does not, however, specifically enact that the deeds of guardians of mi- 
nors made by the order of the probate courts of Oklahoma pursuant to 
section 6 shall be invalid unless approved by the courts having juris- 
diction of the settlement of the estate of the respective deceased allot- 
tees. It does not show that in the enactment of this section there ever 
came to the minds of the legislators the question of the approval of such 
conveyances, and the probability is that that question never did arise in 
their minds. When the entire -act is read and thoughtf uUy considered, 
it does not clearly appear from the provisions of sections 2, 6, and 9 



HARKIS V. BELL 217 

that they are so répugnant that the Congress miist hâve intended by the 
first proviso of section 9 practically to hâve revoked its grant by sec- 
tion 6 to the proper probate courts of Oklahoma of plenary jurisdic- 
tion to hear and détermine the advisability of and to order the sales and 
conveyances of the lands of such minor heirs, and it would seem that 
under the rule vvhich bas been cited the two provisions must stand to- 
gether — that of section 6 as tlie law of the sale of and of the convey- 
ance of the lands of the minor fuU-blood heirs, and the proviso of 
section 9 as the law of the conveyances of full-blood adult heirs. 

Again, the purpose of this législation was not to place vexations and 
uscless obstructions to the disposition of their lands by the full-blood 
minor heirs, such as the subjection of their guardians' conveyances to 
the adjudication of two courts of equal rank, neither of which would 
hâve the power to reverse the other, or to effect a conveyance without 
the consent of the other, would be. On the other hand, it was to as- 
sure to such minors a plenary investigation, trial and décision by a 
compétent court, of the advisability of sales of their lands and of the 
amounts for which they ought to be sold, and to secure to them adé- 
quate priées and a wise use or disposition of the proceeds they ob- 
tained, that this law was enacted. AU this is completely accomplished 
and with unusual care by the provisions of section 6. Not only is a 
compétent court thereby given plenary power and charged with the 
duty to accomplish this purpose, but provision is made for the ap- 
pointment by the Secretary of spécial représentatives to investigate 
the cases, to report to the county court, and to see that the end sought 
is attained. Nothing but delay, expense, and vexation could resuit 
from making the action of the court having jurisdiction of the guard- 
ianship, sale, and conveyance subject to the approval of another court 
of equal rank, which has no power to review the évidence before the 
former court and no authority to order or efïect the sale itself. 

Every statute should bave a reasonable, sensible construction, in 
préférence to an irrational one, which renders it, or a substantial part 
of it, useless or deleterious. The intention of the législative body must 
be presumed to bave been to benefit, not to injure, those interested in 
the subject of the law, and in the light of the considérations to which 
référence has been made it is incredible that the Congress ever intended 
to subject guardian's deeds of the lands of full-blood minor heirs, made 
pursuant to the orders of the only courts which had jurisdiction to 
direct their making, to the approval of any other court of equal rank, 
which had no appellate jurisdiction; and the conclusion is that the true 
interprétation of the Act of May 27, 1908, is that conveyances of 
adult full-blood Indian heirs are subject to the first proviso of section 
9, but that that proviso is inapplicable to guardian's conveyances of 
the interests of minor full-blood Indian heirs which bave been regu- 
larly made pursuant to the orders of the county courts of Oklahoma 
which had jurisdiction of the subject-matters and the parties to the 
proceedings before them in which they were ordered, and that the 
guardian's deed of the interest of the minors, Amos Francis and Eliz- 
abeth Francis, was a valid conveyance without the approval of the 
county court which might bave had jurisdiction of the settlement of the 
estate of Freeland Francis, whose heirs they are. 



218 250 FEDERAL EEPOBTEE 

[8] The minors, Amos and Elizabeth, assign as error the décision 
of the court below that the title to the land in controversy descended 
to the heirs of Freeland Francis under sections 6 and 7 of the Supple- 
mental Creek Agreement of June 30, 1902, 32 Stat. 500, 501, and the 
Appropriation Act of March 3, 1905, 33 Stat. 1048, 1071 in accordance 
with tlîe provisions of chapter 49 of Mansfield's Digest of the Laws of 
Arkansas whereby the interest of Annie Francis became one-half and 
that of Amos, EHzabeth, and Mack one-sixth each, and that the 
court should hâve held that the title descended under section 21 of the 
Ënabling Act of the State of Oklahoma (Act June 16, 1906, c. 3335, 
34 Stat. 277), according to the laws of descent and distribution of 
that State, whereby Annie, Amos, Elizabeth, and Mack would each 
receive one-fourth of the land. But since by virtue of the conclusion 
that the guardian's deed of the interests of the appellants Amos and 
Elizabeth is valid, and that the title to ail their interest in the land 
has passed to the respondents Lightsey and Taylor, thèse minors hâve 
no longer any interest in this assignment, and it is hère dismissed. 
Neither the respondent Mack Francis, nor the présent owners of his 
share, Gertrude Womack and Eugène W. Gill, hâve appealed from the 
decree below or challenged the décision of this question by the court 
below. 

That décision was in favor of Lightsey and Taylor, who now hold 
the interests of Annie, Amos, and Elizabeth ; and so it is that that 
question is not longer hère for détermination , and the decree below is 
affirmed, with costs against the appellants. 



UNITED STATES v. LAW. 

(Circuit Court of Appeals, Eightli Circuit. April 18, 1918.) 

No. 4926. 

1. Indtaks <®=>15(1) — Indian Lakds — Sale. 

tinder Act May 2T, 1908, c. 199, § l, 35 Stat. 312, deolaring that ail 
allotted lands of enrolled full-bloods and enrolled niixed-bloods of three- 
quarters or more Indian blood, shall not be sub.1ect to aliénation prior to 
AprlI 26, 1931, but that the Seeretary of the Interlor may remove sucli 
restrictions whoily or in part, under sucli rules and régulations concern- 
Ing the terms of sale and disposai of tlie proeeeds for tlie benefit of the 
Indians as he may preseribe, where the Secretary of the Interior condi- 
tionally eonsented to a full-blood Clierokee's aliénation of lier allotment, 
and, reserving the right to dispose of the proeeeds of tlie sale, with the 
approval of the Indian siiperintendent, invested the proeeeds in other 
lands, whlch were eonveyed to the allottee with a restriction against 
aliénation prior to 1031, the date fixed in the act, such restriction was 
valid. 

2. Indians <&=3lf)(l) — Aixotments — Restbaints on Aliénation — Enforcb- 

MENT. 

Where the Secretary of the Interior removed restrictions against sale of 
the allotment of a full-blood Cherokee, and, reserving the right to dispose 
of the proeeeds, reinvested the sanie in other property, whieli was con- 
veyed to the allottee with a valid restriction against aliénation, the 

r other cases see sarae topic & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes 



UNITED STATES V. LAW 219 

Uniterl States niay malntain a suit to cancel a mortgage executed by the 
allottee and a sheritï's deed transferring the ijroperty. 
Carland, Circuit Judge, dissenting. 

Appeal from the District Court of the United States for the Eastern 
District of Oklahoma; Ralph E. Campbell, Judge. 

Bill by the United States against J. W. Law and others. From a de- 
cree dismissing the bill as to the named défendant, the United States 
appeals; its motion to dismiss without préjudice as to the other de- 
fendants being granted. Reversed and remanded, with directions. 

W. P. McGinnis, U. S. Atty., and Archibald Bonds, Sp. Asst. U. S. 
Atty., both of Muskogee, Okl. 

J. J. Henderson, of Tulsa, Okl, for appellee. 

Before SANBORN and CARLAND, Circuit Judges, and BOOTH, 
District Judge. 

BOOTH, District Judge. This is an appeal from decree dismissing 
bill of complaint. The suit is brought by the United States against R. 
W. Smith, A. E. Russell, and J. W. Law, to remove a cloud upon the 
title to certain land located in the city of Tulsa, Okl., alleged to be 
owned by Amanda Perry, and in her possession. The complaint al- 
lèges : 

That Amanda Perry is a full-blood Cherokee Indian, and duly en- 
rolled. That in the course of administration of the affairs of the tribe 
she was duly allotted certain lands in the Cherokee Nation. That 
thereafter, in compliance with law, she duly made application for the 
removal of restrictions upon the aliénation of the lands so allotted, and 
that the Secretary of the Interior conditionally removed the restric- 
tions therefrom, reserving the right to dispose of the proceeds arising 
from the sale of the lands upon which restrictions were removed. 
That the Secretary of the Interior disposed of the proceeds arising 
from the sale by investing them for and on behalf of Amanda Perry 
in real estate in the city of Tulsa, Okl., which is the land now in con- 
troversy. That the warranty deed conveying the new lands to Amanda 
Perry, taken with approval of United States by the United States In- 
dian superintendent, contained the following: 

"That for and In considération of the sum of one thousand two huudred 
and forty-flve dollars, to them In hand pald, the recelpt whereof is hereby 
acknowledgcd, from fuuds derived from the sale of restrlcted lands allotted to 
the said Amanda Perry, the same heing funds held by the TJnlted States in 
trust, subject to disbursement under the supervision of the Secretary of the 
Interior, Al ace A. Giles and Elllot N. Giles, her hushand, hâve granted, bar- 
gained, sold, and conveyed unto the said Amanda Perry, grantee, • * * to 
hâve and to hold said described premises unto the said grantee, lier heirs and 
assigns, forever, free and elear and discharged of ail former grants, charges, 
taxes, judgments, mortgages, and other liens and incumbrances of whatso- 
ever nature, subject to the condition that no lease, deed, mortgage, power of 
attorney, contract to sell, or other instrument affecting the land herein de- 
scribed or the title thereto, executed during the lifetime of said grantee at any 
time prior to April 26, 1981, shall be of any force and effect, or capable of con- 
firmation or ratification, unless made with the consent of and approved by the 
Kecretary of the Interior." 



220 250 FEDERAL REPORTER 

That on April 7, 1914, the deed was duly recorded, with the îndorse- 
ments and approval attached thereto. That défendant had knowledge 
of the foregoing facts. That, notwithstanding the restricted condition 
of said lot, Amanda Perry, with her husband, on April 12, 1915, ex- 
ecuted to R. W. Smith and A. E. Russell a mortgage covering said lot. 
Said mortgage was duly recorded. Thereafter, on the 15th day of 
April, 1915, said Smith and Russell duly assigned said mortgage to the 
défendant Law, which assignment was duly recorded. Thereafter 
said Law brought suit in the county court of Tulsa county, Okl, for 
the purpose of foreclosing said mortgage, and on the 22d day of Janu- 
ary, 1916, obtained judgment of foreclosure. Thereafter, on the 29lh 
of September, 1916, the sheriff of said Tulsa county executed a sherifï's 
deed of said land to said Law, pursuant to said judgment, and said 
deed was duly recorded. 

The complaint further allèges that the mortgage, the assignment 
thereof, judgment of foreclosure, and the sherifï's deed, are ail inef- 
fectuai to convey any right, title, or interest in said land, but that they 
constitute a cloud upon the title of Amanda Perry. The complaint 
furtlier allèges that under and by virtue of existing treaties between 
the United States and the Cherokee Tribe of Indians, and by virtue of 
acts of Congress, the United States government has assumed the re- 
lation of guardian and trustée of the property of the Cherokee Tribe 
of Indians and the individual members, and that this relationship now 
exists ; that the présent suit is brought by direction of the Attorney 
General of the United States, and at the request of the Secretary of the 
Interior, by the plaintiff, upon its own behalf and upon behalf of 
Amanda Perry; that the various mortgages, assignments, judgments, 
and deeds above described, executed or caused to be executed by the de- 
fendants herein, are hindrances to the complainant in the f ull discharge 
of its duties to the said Amanda Perry, and are made in violation of 
law, and interfère with the policies of the complainant in supervising, 
distributing, and protecting the funds and property of the Cherokee 
Tribe of Indians, and more particularly that of Amanda Perry. The 
prayer of the complaint is that the mortgage, assignment, judgment, 
and sherifE's deed be canceled and set aside, and défendants restrained 
from interfering with the possession of Amanda Perry. 

The demurrer interposed by défendant Law contains several 
grounds, which may be reduced to two: First, that the bill of com- 
plaint fails ta State a cause of action entitling plaintiff to relief ; sec- 
ond, that the plaintiff has no power or authority to maintain the suit. 
The court below treated the demurrer as a motion to dismiss, and 
granted the motion and dismissed the bill as to défendant Law. Upon 
motion of plaintifï, the bill was dismissed without préjudice as to de- 
fendants Smith and Russell; leaving Law sole défendant upon this 
appeal. 

[1] The main question in the case is: Was the restriction upon 
aliénation which is contained in the deed to Amanda Perry valid? It 
is admitted upon the record that the land originally allotted to Amanda 
Perry was restricted as to aliénation ; that such restrictions were re- 
movable by the Secretary of the Interior ; that application was made 
by Amanda Perry to the Secretary of the Interior for the removal of 



UNITED STATES V. LAW 221 

restrictions upon the land allotted to her, and that the same were re- 
moved conditionally ; that it was part of the conditions that the Secre- 
tary of the Interior reserved the right to dispose of the proceeds of the 
sale of said lands ; that he did dispose of the proceeds by investing the 
same in other land ; that this new land was purchased by the United 
States, through its lawful représentatives, for Amanda Perry ; that the 
deed to said land containing the restrictions above mentioned was pro- 
cured and approved by the United States through its représentative. 
It is claimed, however, by the appellee that there is no authority in 
law for the imposing of such restriction upon aliénation upon the 
land newly purchased. The argument of counsel for the appellee 
seems to be that, while the Secretary of the Interior might lawfully 
impose the condition that he should direct the disposition of the pro- 
ceeds of the sale of the allotment, yet when he had donc this by direct- 
ing an investment in the new land his power ceased. 

The authority under which the Secretary of the Interior acted is 
contained in section 1 of the act of May 27, 1908 (35 Stat. 312, c. 199). 
It reads, so far as hère material, as follows : 

"Ail homesteads of said allottees enroUed as mixed-blood Indians liaving 
half or more than half Indian blood, includins minore of such deïrees of 
blood, and ail allotted lands of enrolled full-bloods, nnd enrolled mixed-bloods 
of tliree-tjuarters or more Indian blood, IncludluR niinors of swch degrees of 
blood, shall not be .subject to aliénation, contract to sell, power of attoruey, or 
any other inonmbranee prior to April twcntj'-sixth, nineteen hundred and 
thirty-one, exeept that the Secretary of the Interior may remove such restric- 
tions, wholly or in part, under such nilos and régulations concerning terms 
of sale and disposai of the proceeds for the benefit of the respective Indians 
as he may prescribe." 

In construing this statute and others of like import, there must be 
kept in view the long-established and well-recognized relationship ex- 
isting between the government and the Indians, the policy of the gov- 
ernment in dealing with the Indians, as shown by Congressional enact- 
ments, and the means adopted f rom time to time by Congress to effect 
and carry ont such pohcy through duly authorized commissions or 
officers. The relationship, the policy, and the means adopted are stated 
in numerous cases. 

In Tiger v. Western Investment Co., 221 U. S. 286, 31 Sup. Ct. 578, 
55 L,. Ed. 738, the court in its opinion said : 

"Congress has had at ail times, and now has, the rlght to pass législation 
în the interest of tho Indians as a dépendent people. * * * That it was 
within tbe power of Congress to continue to restrict aliénation l)y requiring, 
as to full-blood Indians, the consent of the Secretary of the Interior to a pro- 
posed aliénation of lands such as are Involved in this case. That it rests with 
Congress to détermine when its guardianship shall cease, and while it still 
continues It has the right to vary its restrictions upon aliénation of Indian 
lands in the promotion of what it deems the best interest of the Indian." 

In United States v. Gray, 201 Fed. 291, 119 C. C. A. 529, this court 
in its opinion said : 

"For more than a century it has been and still Is the governmental policy 
of the United States to exercise the power granted to it by the Constitution 
(article 1, § S, subd. 3) to protect the Indians and their property from the 
greed, rapacity, cunning, and perfidy of the membcrs of the superior race. 



222 250 FEDERAL REPORTEE 

whleh hâve so often driven tliem to poverty, despair, and war, and to teach 
and persuade them to abandon nomadlc habits and to adopt and practice the 
arts of civilization. In order to carry out thls policy it bas reserved and 
held in trust for tliem large tracts of land and large sums of money derived 
from tlieir release of Iheir rights of occupancy of their lands in thls country, 
it has controlled and managed theIr property for them, it bas furnished them 
with houses, barns, and other permanent improvements, with domestic 
animais, means of subsistence, and money In sniall amounts. It has provlded 
them with government agents to advise them and to protect their property, and 
with physicians, farmers, schools and teachers to instruct them." 

"It has been and stlll is the poUey of the United States to protect the 
property and the rights of the Indlans nnder its control, and to teach them 
agriculture and the arts of civiliKed life. The Indian réservations, the funds 
derived from the lease of their rlght of occupancy to their lands, the lands 
allotted to the individual Indlans, but stlll held in trust by the United States 
during the period of restriction upon aliénation, the leases of thèse lands 
made by the Indian superintendents or agents on the terms and conditions 
flxed by the Secretary of the Interlor ànd approved by him, the tools, animais, 
houses, improvements, and other property furnished to thèse Indlans by the 
United States, and the proeeeds and income from ail thèse, are the means 
by which the nation pursues its beneflcent policy of protection and instruction 
and exercises its lawful powers of government." 

Other décisions are to the same eiïect. Sizemore v. Brady, 235 U. 
S. 441, 35 Sup. Ct. 135, 59 L. Ed. 308; Heckman v. United States, 224 
U. S. 413, 32 Sup. Ct. 424, 56 L. Ed. 820; Choate v. Trapp, 224 U. S. 
665, 32 Sup. Ct. 565, 56 L. Ed. 941 ; United States v. Nice, 241 U. S. 
591, 36 Sup. Ct. 696, 60 h. Ed. 1192; Rainbow v. Young, 161 Fed. 835, 
88 C. C. A. 653. 

Provisions of statutes similar in character to the one hère under 
considération hâve been construed broadly and liberally, with a viev/ 
to effecting the purposes and carrying out the policy established by the 
government. In United States v. Thurston County, 143 Fed. 287, 74 
C. C. A. 425, this court had under considération section 7 of the act 
of Congress of May 27, 1902 (32 Stat. 245, c. 888 [Comp. St. 1916, § 
4223]), as afïecting the sale of lands held by the Omaha and Winne- 
bago Indians under the act of August 7, 1882 (22 Stat. 342, c. 434), or 
the act of February 8, 1887 (24 Stat. 389, c. 119). The clause of sec- 
tion 7 of the act of 1902 under considération reads as follows : 

"That the adult hoirs of any deceased Indian to whom a trust or other 
patent containing restrictions upon aliénation has been or shall be issued for 
lands allotted to him may sell and convey the lands inherited from such dé- 
cèdent, * • * but ail such conveyances shall be subject to the approval of 
the Secretary of the Interior." 

Under this section certain Indian heirs sold their lands with the 
consent of the Secretary of the Interior, but — 

"on condition that the proeeeds of the sales should be deposited to their re- 
spective individual crédits in a bank selected by the Oommissioner of Indian 
AfCairs, subject to their respective checks for not exceeding ten dollars in any 
one month, when approved by the Indian agent or offlcer in charge, and to 
checks for sums in excess of ten dollars per month upon the approval of the 
agent vs'hen speciflcally authorized by the Oommissioner of Indian AfEalrs." 

The county of Thurston having undertaken to tax said moneys so 
deposited in the bank, the United States sought an injunction to pre- 
vent this. The power of the United States to impose upon the proeeeds 



UNITED STATES V. LAW 223 

the conditions above recited was attacked by the county, and in answer 
to this attack the court in its opinion said : 

"Nor is the complainant without lawful authority to hold thèse proceeds 
and to coiitrol their disposition in the same way that it held and controUed the 
lands In trust for the benefit of thèse Indian heirs. The act of 1902 au- 
thorized thèse heirs to sell and convey their Inherited lands only when the 
proposed sales were approved by the Secretary of the Interior. It thereby 
vested In the Secretary i)lenary power to permit or to forbld the sales pro- 
posed. The whole is greater than any of its parts, and includes them ail, and 
the authority to allow or to prohibit proposed sales necessarily included the 
power to consider and détermine the ternis and conditions on whlch such 
sales should be approved. * • * The acts of Congress autliorisied the 
Secretary to make thèse régulations for the purpose of carrying into efCect 
the aet of 1&02, and, when made. they had the forœ of statutory enactments. 
R. S. §§ 441, 465; * * * U. S. v. Eaton, 144 U. S. 688 [12 Sup. Ct. 764, 36 
L. Ed. 591] ; Wilkins v. U. S., 96 Fed. 837 [37 G. G. A. .588]. * * * The al- 
lot.ted lands were held in trust by the United States for the benefit of those 
to whom they were assigned, and tlieir heirs. * * * The proceeds of the 
sales of thèse lands hâve been lawfully substituted for the lands theiuselves by 
the trustée." 

In National Bank of Commerce v. Anderson, 147 Fed. 87, 77 C. C. 
A. 259, the Circuit Court of Apj^eals for the Ninth Circuit had under 
considération the same section (section 7 of the act of May 27, 1902), 
as afïecting a sale of lands by the heirs of one James Taylor, an In- 
dian of the Puyallup Tribe. The lands had been allotted to Taylor un- 
der the General Allotment Act of February 8, 1887. Rules had been 
promulgated by authority of the Secretary of the Interior, requiring 
that ail proceeds of such sales be deposited in United States depositaries 
to the crédit of the heirs, and subject to their checks in amounts of $10 
per month, with the approval of the agent in charge, and in larger 
amounts only when authorized by the Commissioner of Indian Af- 
fairs. An assignée of a share of the proceeds belonging to one of the 
heirs brought suit therefor against the bank. The court in its opinion 
said: 

"The question arising upon the writ of error is whether the proceeds of such 
a sale are payable dlrectly to the helr of the deceased allottee, or are to be 
held in trust for his benefit, and paid to him in such sums as meet the ap- 
proval of the Secretary of the Interior and the Commissioner of Indian AfCairs. 
* ♦ * In arriving at the intention of Gongress in enacting the statute, it is 
important to bear in mlnd prlor législation and the declareci policy of protec- 
tion which the government bas pursued in dealing with the Indians and 
their lands. * * * The statute provides that the lands may be sold with 
the consent of the Secretary. It thus permits a change In form of the trust 
property from land to money. This change may be effected only with the 
consent of the trustée rei)resented in the person of the Secretary of the 
Interior. No citation of authority is needed to sustaiù the gênerai doctrine 
that into whatever form trust property be cimverted, it continues to be im- 
pressed with the trust. That doctrine must be applied to the présent case in 
the absence of the expressed intention of Congress to termlnate the trust. 
We find in the Aet no ground for saying that such was the intention. * * * 
We construe the Act as expressing the intention of Congress, not to end the 
trust, but to permit a change of the form of the trust property." 

In Starr v. Campbell, 208 U. S. 527, 28 Sup. Ct. 365, 52 L. Ed. 
602, the Suprême Court had under considération the provisions con- 
tained in article 3 of the Treaty of 1854 (10 Stat. 1110), relating to 



224 250 FEDERAL REPORTER 

Chippewa Indians of Lake Superior. Arriong the provisions of article 
3 were the following: 

"And the Président may, from time to time, at his dlsoretiou, cause the 
whole to l>e surveyed, and may asslgn to each head of a famlly, or a single 
person over twenty-one yeaiis of âge, eiglity acres of land for his or thelr 
separate use; and he may, at his discrétion, as fast as ttie occupants become 
capable of transacting their own altalrs. Issue patents therefor to such occu- 
pants, with such restrictions of the power of aliénation as he may see fit to 
impose." 

The right to allotments was subsequently extended by act of Con- 
gress to ail Indians on certain réservations irrespective of âge or 
condition. 

In December, 1893, the Président made certain rules and régulations 
to govern contracts for the sale of timber by the Indians; among 
others, rule 7, which provided : 

" * * * And the proceeds of timber taken from the allotted lands of 
the réservation shall, after the déductions above stated, be deposlted in some 
national bank subject to check of the Indian owner of the allotment, coun- 
terslgned by the Indian agent of the La Pointe agency, unlesa otherwise stipu- 
lated in contracts with particular Indians." 

In January, 1902, the plaintifif, Indian, a minor, made a contract for 
the sale of timber standing upon his allotment. In December, 1902, 
the Président amended rule 7 by adding thereto the following : 

"If the Indian agent shall in any case be of the opinion that tlie allottee is 
not compétent to manage his own affairs, he shall, subject to the approval 
of the Commissioner of Indian Affairs, hâve authority to flx the sum or sums, 
if any, such allottee shall be permitted to withdraw from deposlt." 

The Commissioner of Indian Affairs modified the timber contract 
so as to make it subject to the amendment last menti oned, and ap- 
proved it as thus modified. Action was brought by plaintiff, Indian, 
against défendant Indian agent to recover the moneys collected and 
held by him. It was contended by the plaintiff that the Commission- 
er had no authority to interfère with the disposition of the money 
by the Indian agent, and that the guardian of the plaintiff was the 
proper party to détermine how much should be paid and expended 
for the plaintiff. The court in its opinion disposed of this conten- 
tion, using the following language : 

"We cannot yield to the contention that the consent of the Président to the 
contract ended his authority over the matter. In other words, that he could 
put no conditions upon it" 

— citing, with approval, United States v. Thurston County, supra ; Na- 
tional Bank of Commerce v. Anderson, supra. It was held that the re- 
striction imposed upon the proceeds was valid. 

In view of the foregoing décisions, and keeping in mind in the 
case at bar the relationship existing between the United States and the 
Cherokee Indians, including Amanda Perry, the policy of the govern- 
ment in its dealings with thèse Indians, and the methods and means 
adopted to carry out such policy, after careful considération of the 
language of section 1 of the act of May 27, 1908, we conclude that the 
restrictions imposed by the Secretary of the Interior upon the aliéna- 



UNITED STATES V. LAW 225 

tion of the new lands purchased for Amanda Perry were in further- 
ance of the policy of Congress in protecting and caring for her as a 
ward of the government, were within the authority granted by said 
section 1, and were valid and enforceable. 

McCurdy v. United States, 246 U. S. 263, 38 Sup. Ct. 289, 62 L. Ed. 
• — -, is not opposed to the conclusion hère reached. In that case the 
principal question decided was whether the Secretary of the Interior 
had authority to order inserted in a deed of land running to an Osage 
Indian the f ollowing clause : 

"ïhis conveyanee Is mado and accepted with the understandiug, and under 
the condition that the above described property is to be and remain inalién- 
able and not subjcct to transfer, sale or incunibrance, for a period of elghteen 
years from the Ist day of July, 1933, exeept by and with tlie express consent 
and approval of the Secretary of the Interior, or his successor in office." 

The f acts in the case were that the United States held certain funds 
in trust for the Osage Indians and to their individual crédit; that the 
Secretary of the Interior paid from the principal of the trust fund so 
held for Robert Panther, a noncompetent Osage allottee, the sum of 
$1,750, which was applied in payment for a lot of land in the city of 
Pawhuska. The land when purchased was conveyed to one Brenner, 
as trustée for Robert and Emma Panther, but soon after it was 
conveyed by Brenner to Robert Panther individually. The authority 
of the Secretary of the Interior to bave the above-quoted clause in- 
serted in the deed was challenged in certain tax proceedings. The 
authority was claimed on behalf of the United States under section 5 
of the act of April 18, 1912 (37 Stat. 86, c. 83), which reads as foUows : 

"Sec. 5. That the Secretary of the Interior, in his discrétion, hereby is 
authorized, under rules and régulations to be prescribed by hira and upon 
application therefor, to pay to Osage allottees, including the bllnd, insane, 
crippled, aged, or helpless, ail or part of the funds in the treasury of the 
United States to their individual crédit: Provided, that he shall be flrst sat- 
Isfied of the competency of the allottee or that the release of said individual 
trust funds, would be to the manifest best interests and vvelfare of the allottee: 
l'rovided further, that no trust funds of a minor or a person above men- 
tioned \vhf> is incompétent shall be released and paid over exeept to a guardian 
of sucli person duly appointed by the proper court and after the flling by such 
guardian and approval by the court of a sufflcient bond conditioned to faith- 
fuUy administer the funds released and the avails thereof." 

The court in its opinion in passing upon said section said: 

"Tlie Secretary is authorized to prescribe the rules and régulations under 
which such releases shall be made; but he is not given authority to exercise 
control of any property in which the funds released niay thereafter be invested, 
or othcrwise to creafe with the released funds a goveruuieutal instrumentality 
for the protection of the Osages. * » * " 

Again : 

"There is nothing in the act or in the facts to which it applies that Indi- 
cates a purpose to extend goveriimeutal control to property in which released 
funds may be invested. * • * " 

Again : 

"Furthermore, in the case at bar It Is not shown that the money released 
from the trust was invested directly in property restricted as to aliénation. 
250 F.— 15 



226 250 FEDERAL REPORTER 

* * • It Is consistent with the facts showii that the restriction upon alién- 
ation inserted in the deed, was not a coutinuatioii of eontrol reserved by the 
Secretary o£ the Interior, but a bringlng under his eontrol of a part of Pan- 
ther's estate theretofore freed." 

In the case at bar there are in the act involved (section 1 of the act 
of May27, 1908 [35 Stat. 312]) words which clearly indicate a purpose 
to extend govemmental eontrol to property in which the proceeds of 
released lands may be invested. The last clause of the section reads : 

"Except that the Secretary of the Interior may remove such restrictions, 
wholly or in part, under such rules and régulations concemlng terms of sale 
and disposai of the proceeds for the beneflt of the respective Indlans as he 
may prescrlbe." 

Furthermore, the inoneys derived from the released lands in the 
instant case were invested directly in the property upon which the 
restriction as to aliénation was placed. There was consequently not a 
bringing under the eontrol of the Secretary of the Interior a part of 
the estate of Amanda Perry theretofore freed, but, on the contrary, 
merely a continuation of the eontrol reserved by the Secretary of the 
Interior. This latter distinction is specifically noted in McCurdy v. 
United States, supra. 

It is contended by appellee that no power exists even in Congress to 
withdraw lands once subject to taxation by state authority from such 
status of taxability, and that the restrictions upon aliénation imposed 
by the Secretary of the Interior upon the new land purchased for 
Amanda Perry undertake to efîect such withdrawal of the new land. 

The question whether exemption from taxation was attempted to 
be created by the restriction provision contained in the deed of the 
new land to Amanda Perry, and the further question whether Con- 
gress couid authorize the création of such exemption as to this new 
land, or the transfer of the exemption from the old land to the new, 
are neither of them involved in the présent case, and we express no 
opinion thereon. 

[2] In, view of what has been said as to the character and validity 
of the restrictions, the question of the right of the govemment to 
maintain the présent suit requires no discussion. Such right is thor- 
oughly established. Section six, last paragraph, 35 Stat. 312; Heck- 
man v. United States, 224 U. S. 413, 32 Sup. Ct. 424, 56 L. Ed. 820; 
affirming 179 Fed. 13, 103 C. C. A. 1 ; United States v; Rickert, 188 U. 
S. 432, 23 Sup. Ct. 478, 47 L. Ed. 532; United States v. Noble, 237 U. 
S. 74, 35 Sup. Ct. 532, 59 L. Ed. 844; United States v. Gray, 201 Fed. 

291, 119 C. C. A. 529; United States v. Black, 247 Fed. 942, C. C. 

A. . 

It follows that the decree dismissing the bill should be reversed, and 
the cause remanded, with directions for further proceedings not in- 
consistent with the views herein expressed ; and it is so ordered. 

CARLAND, Circuit Judge (dissenting). I am of the opinion that the 
provision in the deed from the Gileses to Amanda Perry, whereby 
she is prohibited from making any transfer of the land described in 
the deed without the confirmation of the Secretary of the Interior, is 
void for want of power in the latter to impose such a condition. 



GAKDINER V. DU PONT 



227 



GARDINER et al. v. DU PONT. 

(Circuit Court of Appeals, Second Circuit. February 13, 1918. On Keliearing, 

Mardi 11, 1018.) 

No. 151. 

1. COXTRACTS <&:=501 — VaLIDITY — CoNSIDEKATIOÎf. 

A contnict to pay for services "rendered and to be rendered" is net 
witliout eonsirteratlou. 

2. CoNTUACTS <g^:;22(.'î)— Action fob Beeacii— Sufitcienct of Evidence. 

Evidence, consisting for the most part of correspondeoce between the 
parties, considered, and held insufticlent to sustaiu an action against tlie 
défendant for breacli of cor tract; it rattier appearing that the contract 
was to be performed by a corporation to be tormed, and in wliicli both 
parties were interested. 

In Error to the District Court of the United States for the Southern 
District of New York. 

Action at law by George N. Gardiner, Jr., Bentley Gardiner, and 
Mary Elsie Gardiner, as executors of the last will of George N. Gardin- 
er, deceased, against T. Coleman Du Pont. Judgment of dismissal, 
and plaintiffs bring error. Modified and affirmed. 

L. Laflin Kellogg and Alfred C. Pette, both of New York City, for 
plaintiffs in error. 

Julius F. Workum and Leland B. Duer, both of New York City, for 
défendant in error. 

Before WARD and ROGERS, Circuit Judges, and MANTON, Dis- 
trict Judge. 

MANTON, District Judge. Plaintiffs in error appeal from a judg- 
ment of dismissal at the end of the plaintiffs' case. The action is to 
recover $200,000 alleged to be due for breach of contract. On August 
12, 1912, the Equitable Life Assurance Society of the United States, 
owner of a block of land situated on the east side of Broadway, bound- 
ed on the north hy Cedar street, on the south by Pine street, and on 
the east by Nassau street, contracted for its sale to the défendant 
under certain conditions contained in an agreement of that date. Sub- 
sequently, a large office building was erected on this site by a Com- 
pany thereafter incorporated. It appears that prior to this date, the 
défendant was negotiating with Frank M. Andrews, an architect, for 
the organization of a corporation, which would take over the title to 
this property and erect a building thereon, and the agreement above 
referred to appears to be part of their plan, with this object in view. 

On August 9, 1912, Andrews and Du Pont wrote as follows (Plain- 
tiffs' Exhibit 1) : 

"Mr. T. Coleman Du Pont, Wilmington, Delaware— Dear Sir: Conflrming 
my conversation with you and recording our understanding in connection 
with the Equitable Building deal, there is to be paid to Mr. George N. Gardiner 
a commission, for services rendered and to be rendered, of $100,000 cash and 
$100,000 par value of the common stock of the company, same to be contingent 

@3aFor other cases see same topic & KEY-NUMBBB in ail Key-Numbered Dlgests & Indexes 



228 250 FEDERAL REPORTEE 

npon the final closing of tlie deal now in progress for tlie piirchase of thc 
Equitable site and the érection of a building thereon. Tlie cash commission 
will be paid ont of the first moneys availnble froni the sale of the preferred 
stock and second mortgage bonds of the conipany. 

"Yours very truly, [Signed] Frnnli M. Andrews. 

"Dear Frank: The above Is just as I iinderstood it, and provision will lx> 
made to take care of this as early as possible. 

"[Signed] T. G. Du Pont." 

It is upoii this instrtiment that the plaintiffs claim the contractual 
obhgation with the défendant, the alleged breach of which gives rise 
to this suit. 

[1] The court below dismissed the complaint, assigning as a rea- 
son that the contract was unilatéral, and that there was no considération 
given which would support plaintiffs' right to recover. A dismissal 
on the merits for this, and lack of considération, is not justified. If 
the contract was a personal obligation of Du Pont, there is sufficient 
considération passing from the intestate of the plaintiffs in error, in 
the promise of "services rendered and to be rendered," to support the 
claim of the plaintiffs for a commission. Svkes v. Chadwick, 18 Wall. 
(85 U. S.) 141, 21 h. Ed. 824; Casserleigh v. Wood, 119 Fed. 308, 
56 C. C. A. 212; Miller v. McKenzie, 95 N. Y. 575, 47 Am. Rep. 
85. But we think the dismissal may he sustained for other reasons. 

[2] In the letter of August 9th, it appears a conversation was had 
with défendant regarding their understanding with respect to the Equi- 
table Building deal, one of the terms being that Gardiner was to be 
paid a commission of $100,000 cash and $100,000 par value of com- 
mon stock for services rendered and to be rendered, and this to be 
contingent upon the closing of the deal in progress. Provision was 
made for the payment of the money, to wit, the cash commission to 
be paid out of the first moneys available from the sale of preferred 
stock and second mortgage bonds of the company. The mémorandum 
signed by the défendant, "Provision will be made to take care of this 
as early as possible," does not indicate his intention to take care of 
it personally, but in some other way, at some later time. The $100,000 
worth of stock to be paid must necessarily await the organization of 
the company and be paid as part of the promoter's compensation. That 
any payment to Gardiner was contingent to the deal going through 
seems apparent from the correspondence and intent of the parties. 
There is nothing to indicate that défendant was binding himself , or that 
the parties to the transaction believed he was binding himself. On 
October 9th, Gardiner wrote: 

"15 William Street, New York, October 9, 1912. 

"General T. Coleman Du Pont, 40 East 25th Street, New York — My Dear 
General: I am informed that the preferred stock of the New E<initable Build- 
ing Company has been sold, and therel'ore it would seeni that, in aecordance 
with my agreement with Mr. Andrews and youi-self, of August 9th last, my 
compensation for services rendered should now be taken care of. While, of 
course, I hâve every confidence that my agreement wltli you and Mr. Andrews 
will be carried out to the letter, I would gi-eatly appreciate It if you will ar- 
range to take care of this matter at the earliest possible moment. WiU you 
kindly let me hear from you.jind with kindest regards, believe me, 

"Sincerely yours, George N. Gardiner." 



KENNELLT V. FREDEBICK 8TABR CONTEACTING CO. 229 

The language of this letter indicates that, the Equitable Building 
Company having been formed, Gardiner was looking for his compen- 
sation from the promoters, Andrews and Du Pont, and that to be 
paid out of the funds and stock resulting from such organization. Ccr- 
tainly the language of the letter of October lOth from the défendant 
to Gardiner indicates this, as do the letters of November 29th and 30th. 
The phrase in the letter of August 9th, "There is to be paid to George 
M. Gardiner a commission for services rendered and to b,e rendered," 
indicates otlier than a personal obligation to pay, "and the cash com- 
mission to be paid out of the first moneys available from the sale of 
preferred stock and second mortgage bonds of the company" is made 
payable, not out of funds of the défendant, or funds which might come 
to the défendant by reason of this deal, but out of future funds to come 
into the treasury of some company to be organized thereafter. The 
language is entirely foreign to the purpose of payment out of the pocket 
of the défendant, but indicates an intention to pay out of the treasury 
of the new company to be formed. When Gardiner was seeking pay- 
ment of this obligation, he seems to hâve gone to Andrews for this 
purpose. This does not indicate that Gardiner deemed défendant per- 
sonally liable. When the défendant in his letter of October 30th re- 
plied : 

"Mr. Andrews told me that payments to you were to be made out of the 
first monies that came Info hnnd of the company. The company has just made 
a call of 10 per cent, payable December 1 to 10 (I think), and the treasurer has 
been reqnested to take care of you out of the first funds receivecl" 

— Gardiner seems to hâve been satisfied, for he retained this letter 
without objection, and there is nothing in the record to indicate that 
Gardiner looked to anybody else but Sie treasury of the company to 
be taken care of. 

We think that for this reason judgment of dismissal upon the merits 
should be sustained. 

On Rehearing. 

PER CURIAM. The court below is directed to strike out from 
the judgment the words "upon the merits," to make it one of nonsuit 
only, and, as so modified, the judgment is affirmed, with costs. 



KENNELLT v. FREDERICK STARR CONTRACTING CO. 

(Circuit Court of Appeals, Second Circuit. February 25, 1918. On Reargument, 

April 10, 1918.) 

No. 107. 

1. Appeal and Erbob <S=173(1) — Review — ISCopb. 

The défense that respondent, who chartered a scow, was liable only for 
Injuries resulting from négligence, the charter being a démise, cannot for 
the first time be raised on appeal from a decree for the owner. 

2. Appeal and Ebeok ®=>750(1) — Assiqnments of Ebkob — Waivee. 

On appeal by the charterer from a decree In favor of the owner for In- 
juries to a scow where the charterer asserted that recovery should hâve 
been allowed only in so far as the owner was not insured, such contention 

@=jPor other cases «ee «ame toplc & KETîf-NTIMBBIMn ai l Key-Numberefl Dlgests & I ndexe» 



230 250 FEDERAL REPORTEE 

was équivalent to an abandonment of any point except the question of 
ii;surance, and an assignment of errer caunot be construed to raise the 
contention tliat the charterer was liable only for négligence. 
3. Shipping <g=54 — Ohartebs — Injurt to Vessel — Insurance. 

Where the parties to a charter agreed that if the scow was sent ont 
of the harbor limits the charterer should pay the additional premlum for 
Insurance, and, the scow being sent out of the harbor limits, the owner 
took out additional Insurance for which the charterer paid, such Insur- 
ance canuot be deemed to hâve inured to the benefit of the charterer and 
to limit the owner's recovery to compensation for injuries to the scow not 
covered by Insurance. 

Ward, Circuit Judge, dissentlng in part. 

Appeal from the District Court of the United States for the South- 
ern District of New York. 

Libel by Dennis A. Kennelly against the Frederick Starr Contracting 
Company. From a decree for libelant, défendant appeals. Affirmed. 

Harrington, Bigham & Eriglar, of New York City (T. Catesby Jones, 
of New York City, of counsel), for appellant. 

Macklin, Brown & Purdy, of New York City (Pierre M. Brown, of 
New York City, of counsel), for appellee. 

Before WARD and ROGERS, Circuit Judges, and LEARNED 
HAN'D, District Judge. 

WARD, Circuit Judge. The Hbel allèges that the libelant April 9, 
1915, chartered the scow John B. Kennelly to the Frederick Starr Con- 
tracting Company for $5 a day, to be under the charge, control, and 
care of the charterer while in its sei^vice and to be returned in as good 
condition as when received,' ordinary wear and tear only excepted. 

The answer adriiits chartering the boat along with the owner's cap- 
tain at $5 per day and allèges that the charter was not a démise. 

There is no proof of any agreement to return in as good order and 
condition as when received, ordinary wear and tear only being ex- 
cepted, and there is proof that the navigation of the boat was in con- 
trol of the charterer. Therefore we find that the charter was a demfse 
and the charterer liable as bailee only for damage to the boat attributa- 
ble to its own négligence or to that of other persons for whom it was 
responsible. Monk v. Cornell Steamboat Co., 198 Fed. 472, 117 C. C. 
A. 232. 

There was a subséquent agreement that if the scow was sent out of 
the harbor limits the charterer should pay the additional premium for 
Insurance. It did send the boat outside the limits, and the owner, be- 
ing advised of the fact, took out the additional insurance, for which the 
charterer paid the premium. 

On or about April 26th, the scow was injured while at anchor in 
Pelham Bay, outside the harbor Hmits, by being carried on a rock in a 
very high wind and without the négligence either of the captain or of 
the charterer. 

The answer sets up as a separate defettse that the libelant had col- 
lected his damages from, the underwriters and that the agreement of 
the parties was that the insurance was to inure to the benefit of the 

©ssFor other cases see same topic & KBY-NUMBBR in ail Key-Numbered Dlgests & Indexes 



UNION DAIET CO. V. UNITED STATES 231 

charterer. The charterer does not défend on the ground that the un- 
derwriter and not the libelant is the real party in interest, in whose 
name suit should always be brought (Fretz v. Bull, 12 How. 466, 13 L. 
Ed. 1068) and that payment to the libelant with notice of that fact 
might not protect it against a subséquent claim by the underwriter, but 
on the ground that the Insurance was to protect it as well as the owner. 

There is no évidence of this, and when the libelant offered the policy 
in évidence it was excluded upon the charterer's objection. As the 
charterer was not liable for the damage, the underwriter could not re- 
cover against it in any event 

The decree is reversed. 

On Reargument. 

PER CURIAM. [1-3] A majority of the court think that the issue 
of négligence in this case was not presented by the appellant originally 
and that we should not take that point for him on this appeal, regard- 
less of the merits. It is true that in the proceeding he claimed below 
that he had not been négligent in leaving the scow as he did, but the 
assignments of error were not suiïicient to raise the point except by 
what we think to be an undue extension. The only assignment of er- 
ror which can in any sensé be said to raise it is the first, that "the Dis- 
trict Court erred in finding respondent was liable for the damages sus- 
tained by the libelant." If the case rested merely on that, we might 
hold that such an assignment was suflficient to raise the question of 
négligence, but it did not. Upon the first argument the point was not 
raised at ail, and at the conclusion of his proof at page 11 the appel- 
lant said in speaking of the judge below, "He should hâve allowed a 
recovery against the respondent-appellant only in so far as Kennelly 
was uninsured." This we consider équivalent to an abandonment of 
any point except the question of Insurance, and upon that we ail agrée 
that the case is controlled by White v. Upper Hudson Stone Ce, 248 
Fed. 893, C. C. A. , decided December 11, 1917. 

The decree will be affirmed, but without costs. 



UNION DAIRY CO. v. UNITED.STATES. 

(Circuit Court of Appeals, Seventh Circuit. February 20, 1918.) 

No. 2534. 

1. Food <s=>% New, vol. 15 Key-No. Séries — Food and Deug Act — Viol-^tion. 
Under Food and Drug Act (Act June 30, 1906, c. 8915) §§ 2, 6, 9, 34 
Stat. 768 (Comp. St. 191G, §§ S718, 8722, 8725), respectlvely declaring that 
the introduction Into any state or territory from any other state or 
territory of any article of food or drugs which is adulterated and mis- 
branded is prohibited, that the term "food" shall Include ail articles used 
for food, drink, confectlonery, or condiment by man or other animais, 
and that no dealer shall be prosecuted when he can establlsh a guaranty 
signed by the wholesaler, manufacturer, or other party reslding in the 
United States, from whom he purchased such article, that the same waa 
not adulterated or misbranded, a dairy company, which shipjied from its 
receiving plant in Illinois to Missouri milk, which was adulterated by 
the addition of water and which contained decomposed animal matter, 

> — < — — — . « I 

^=»For other cases see same topic & KEY-NUMBER In ail Key-Numbered Dlgests & Indexe* 



232 250 FEDERAL REPORTER 

cannot defeat a prosecution on tlie gronnd tliat the milk was to be treated 
in Missouri, and was not an article of food until after treatment. 

[Ed. Note. — For other définitions, see Words and Phrases, First and 
Second Séries, Food.] 

2. Food ®=»21 — "Adultération" — Evidence — JumciAr; Notice. 

In View o£ Food and Drug Act, § 7 (Comp. St. 1916, § 8723), declarins 
tliat an article shall be deemed to be adulterated if auy substance bas 
been mixed wlth it, so as to reduce or lower or injuriously affect its quali- 
ty or strength, it Is unneeessary, in a prosecution for the Interstate trans- 
portation of milk adulterated with water, for the court to receive évi- 
dence that the addition of water injuriously afCected the quality or 
strength of the milk. 

[Ed. Note. — For other définitions, see Words and Phrases, First and 
Second Séries, Adultération.] 

In Error to the District Court of the United States for the South- 
ern Division of the Southern District of Illinois. 

The Union Dairy Company, a corporation, was convicted of vio- 
lating the Food and Drug Act, and it brings error. Affirmed. 

Writ of error to review judgment in favor of the government and 
against plaintiff in error for violation of Food and Drug Act. Plain- 
tif? in error is charged with having shipped 75 cans of milk from 
Troy, 111., to itself at St. Louis, Mo., which milk was adulterated 
through the addition of water, and it was further charged that "filth, 
pùtrid and decomposed animal substance," was found therein. 

L. W. Holder, of Chicago, 111., for plaintiff in error. 
John E. Dougherty, of Peoria, 111., for the United States. 

Before BAKER, ALSCHUEER, and EVANS, Circuit Judges. 

EVAN A. EVANS, Circuit Judge. [1] Plaintiff in error contends 
that it was shipping the milk from a receiving station in Illinois to 
itself in Missouri, there to be treated, impurities removed, and the 
milk standardized ; that while in transit it was not an article of food 
such as was defined by the Food and Drug Act, and did not become 
such an article of food until after treatment. Were we to adopt this 
conclusion, it would do violence to the plain language of section 2 
of the act under which prosecution is brought. The first sentence of 
section 2 reads:- 

"The introduction into any state or terrltory or the District of Columbia, 
from any other state or territory or the District of Columbia, or from any 
torelgn country, or sblpment to any foreign country of any article ot food 
or drugs which is adulterated or misbrauded, withln the meaning of thls 
act, is hereby prohiblted." 

Section 6 of the act provides: 

"The term 'food' as used berein, .shall Inclitde ail articles used for food, 
driuk, confectionery, or condiment by man or other animais whether simple, 
mixed, or compound." 

Our conclusion is strengthened by another section of the act. Sec- 
tion 9 provides : 

«g^sPor other cases see same topio & KBY-NUMBER in ail Key-Numbered Digests & Indexes 



FEDERAL COAL CO. V. BALLAED 233 

"No dealer shall be prosecuted under the provisions of this act, wlien 
he can establlsh a gnnrantee signed by the wholesaler, jobber, manufacturer or 
other party, residiiig in the T'nlted States, from whom be purchased such arti- 
cles, to the eU'ect that the same is not adulterated or misbranded within the 
meaning of this act, designatlng it." 

In Hipolite Egg Co. v. United States, 220 U. S. 45, 31 Sup. Ct. 364, 
55 1,. Ed. 364, the court said : 

"Transportation in iuterstate commerce is forbidden to them [decayed 
eggs], and in a sensé they are made eulpable as well as tbeir shipper. It is 
clearly the purpose of the statute that they shall not be stealthily put into 
iuterstate commerce and be stealthily taken out agaiu * * * at their 
destination and be given asylum in the mass of property in the state." 

In passing this act, Congress was endeavoring to protect the pub- 
lic by keeping out of commerce certain illicit articles, debased by 
adultération, and it would be an un justifiable construction of the act 
to make liability turn upon a différence in identity of consignor and 
consignée, or the secret intent with which a shipper made the ship- 
ment. 

[2] Plaintiff in error further contends that the évidence fails to 
show any adultération at ail, or such an adultération as injured the 
milk as food. We hâve carefuUy examined the record, and, giving 
the stipulation of the parties the fair meaning which we believe was 
intended, the adultération was clearly established. It was unnecessary 
for the court to receive évidence to establish the fact that the addi- 
tion of water to milk injuriously afifected the quality or strength of 
milk. See section 7 of the act. 

Judgment is affirmed. 



FEDERAL COAIi CO. et al. v. BALLARD et al. 

(Circuit Court of Appeals, Sixth Circuit. March 15, 1918.) 

No. 3138. 

Corporations <@=574 — Reokganization of Corporation — Pbelimxnary In- 
jukction. 

An order granting a preUminary injunctlon, and appointing receivers 
in connection with the proceedings for reorganization of an msolvent 
corporation, aflirmed as modified. 

Appeal from the District Court of the United States for the Eastern 
District of Kentucky ; Andrew M. J. Cochran, Judge. 

Suit in ecjuity by S. Thurston Ballard and others against the Féd- 
éral Coal Company, T. R. Preston, C. M. Preston, F. B. Martin, W. 
A. Sadd, U. A. Powell, and others. From an order for preliminary in- 
junction and receivers, défendants appeal. Modified and affirmed. 

Charles C. Moore, J. J. Lynch, and Allison, Eynch & PhiUips, ail of 
Chattanooga, Tenu., and Harmon, Colston, Goldsmith & Hoadley and 
Edw. Colston, ail of Cincinnati, Ohio, for appellants. 

T. Kennedy Helm and Stanley E. Sloss, both of Eouisville, Ky. 
(Helm & Helm and Bingham, Sloss, Tabb & Mann, ail of Louisville, 
Ky., of counsel), for appellees. 

Ê=»For other cases see same topic 4; KBY-NUMBER in ail Key-Numbered Dlgests & Indexes' 



234 250 FEDERAL REPORTER 

Before WARRINGTON, KNAPPEN, and DENISON, Circuit' 
Judges. 

PER CURIAM. Appeal from an order for preliminary injunction 
and for receivers. We agrée with Judge Cochran that the arbiter who 
gave the "Chattanooga interests" the majority in the meeting of Sep- 
tember 15th was disqualified by intereSt, and that the proceedings of 
that meeting were incidental to a deliberate plan for overriding an es- 
sential provision of the reorganization agreement. 

We also agrée with him that it is unnecessary now to détermine the 
vaHdity of the voting trust. The plainest principles of fair deahng 
not only require that the Chattanooga interests should co-operate in 
every reasonable way to make the voting trust vahd and effective as 
they agreed, but also demand that, if the law dbes not permit this re- 
suit, the reorganization agreement shall fail entirely, and the property 
be sold and the proceeds dîstributed'as if that agreement had not l^een 
made. We need ônly say that the voting trust is not so apparently, pr 
so surely, invalid — under the laws of a state to which the parties may 
resort for organization or under the laws of Kentucky — as to require 
us now to assume that invalidity. 

The mandatory provisions for réçalling and placing in the custody of 
the clerk the temporary bonds which were issued just before the bill 
was filed, but while the controversy was pending in another form, may 
well hâve been thought reasonably nècessary to effective maintenance 
of the status quo during this litigation, and are approved ; but those 
further mandatory provisions, which direct releases, cancellations, or 
the exécution of conveyances, transfers, deeds, etc., seem to go beyond 
the scope of a provisional order, and they should be suspended, but 
without préjudice to the re-entry of any or ail of them upon final de- 
cree, or earlier, if any exigency shall require, and without préjudice 
ta the broadening of the injunction and receivership in any way that 
may be nècessary to make them efficient. 

In ail other respects, the order is affirmed. No costs are awarded. 



DETROIT SHOWCASE CO. v. KAWNEER MFG. CO. 

(Circuit Court of Appeals, Sixth Circuit. April 5, 1918.) 

No. 3089. 

1. Patents ®=»328 — Validity and Infringement — Stoee Front Construc- 

tion. 

Patent No. 852,450, for store front construction, held valid and in- 
fringed. 

2. Patents <St=»238 — Infrikgement — Uniting Two Parts in One. 

WhUe infringement is not avolded by forming in one part two éléments 
of a patented device, if the part tlius formed secures tlie same results in 
substantially the same way as the two éléments, a combination claim Is 
not infringed, where one of its éléments is omltted, without the substitu- 
tion of an équivalent. 

^=5For othe? cases see same toplo & KBY-NUMBBH in ail Key-Numbered Dlgests & Indexes 



DETROIT SHOWCASE CO. V. KAWNEKE MFG. CO. 235 

8. Patents (g=5328 — Infeingement — Ornamental Connection Between 
Glass Plates. 

Tlie Plym patent, No. 860,150, relating not only to, store front but to 
showcase construction, and designed to provide a simple, strong, durable, 
inexpensive, and ornamental connection between glass plates, helâ, not 
Infringed. 

4. Courts iS=5290 — Fédéral Godets — Jubisdiction. 

Where a patent bas been held valld and infringed, the unfair compéti- 
tion feature arlsing out of tUat lufringement may be Included in an 
aecounting for profits and damages, tbough tbe parties are citizens of 
the same state. 

5. Trade-Maeks and Tbade-Names <S=370(1) — Unfaib Compétition — What 

constitutes. 

Défendant, which appropriated plalntifC's patent for sasb rail construc- 
tion, is not liable for unfair compétition, where there was no doser imita- 
tion of plaintilï's product tban would naturally resuit from. the appropri- 
ation. 

6. Trade-Marks and Teade-Names <©=T3(1) — Unfaib Compétition — Protec- 

tion. 

Where a word is descriptive of the article sold, it is not the subject of 
a trade-mark, and it will not recelve protection, unless it has been so used 
as to bave acquired a secondary meanlng. 

7. Trade-Maeks and Teade-Names <S=>93(3)— Unfaib Compétition — Evi- 

dence. 

Evidence held Insufflcient to show that plaintifC had a trade-mark In the 
tenu 'almetal," under \yhlch it sold its metallic sasb rails, etc., so that 
defendant's use of that word to descrlbe its own metallic sash rail con- 
struction was not unfair compétition. 

8. Teade-Maekb and Tbade-Names <Sî=>71 — Unfaib Competttion — Vauditt 

OF Trade-Mark. 

The existence of a valid trade-mark Is not essentlal to a rlght of ac- 
tion for unfair compétition, where défendant palmed ofC Its products as 
those of plaintlff. 

9. Courts <S=3290 — Fédéral Coubts — Jubisdiction. 

Where a patent was found not to hâve been infringed, and the parties 
to the suit were citizens of the same state, the fédéral court held, under 
the facts presented, without jurisdiction over a cause of action for un- 
fair compétition arlsing out of defendant's sale of the alleged Infringing 
articles. 

Appeal from the District Court of the United States for the Eastern 
District of Michigan ; Arthur J. Tuttle, Judge. 

Suit by the Kawneer Manufacturing Company against the Détroit 
Showcase Company. From a decree for complainant (240 Fed. 737), 
défendant appeals. Affirmed in part, and in part reversed and re- 
manded, with directions. 

Pagelsen & Spencer, of Détroit, Mich. (L,eo M. Butzel, of Détroit, 
Mich., on the brief), for appellant. 

W. R. Lane and Clarence J. Loftus, both of Chicago, 111., for ap- 
pellee. 

Before KNAPPEN and DENISON, Circuit Judges, and SATER, 
District Judge. 

KNAPPEN, Circuit Judge. Suit for inf ringement of United States 
patents No. 852,450, May 7, 1897, and No. 860,150, July 16, 1907, both 

^s9For other cases see same toplo & KBY-NXJMBBR In aU Key-Numbered Dii:esta.& Indexes 



236 



250 FEDERAL REPORTER 



to Francis J. Plym, and for alleged unfair compétition in connection 
with the making, selling, and using of the alleged infringing devices. 
The District Court found both patents valid and infringed, and also 
found for complainant on the issue of unfair compétition. 240 Fed. 
737. This is an appeal from 'the interlocutory decree for injunction 
and accounting on both features of the case. 

[1] 1. Patent No. 852,450 (for convenience called the first patent) 
relates to store front construction. Claims 5, 6, and 7 are involved. 
This patent was before us in Toledo Plate, etc., Co. v. Kawneer Mfg. 
Co., 237 Fed.^ 364, 150 C. C. A. 378, and the claims hère in suit were 
there held valid as against ail the références to the prior art cited 
hère. We refer to the report of that case for a description of the pat- 
ent and a statement of the claims. The patent must be held valid hère. 
On the subject of infringement, the only question is whether defend- 
ant's gutter member is "résilient," as defined in our former opinion. 
This question is purely one of fact. The claimed démonstration of non- 
resiliency presented failed to satisfy the court belov^^, whicli was con- 
vinced by its own independent experiments that there was présent 
substantial resiliency, within the définition of that term recognized in 
our opinion in the Toledo Case. We are satisfied that defendant's 
device has fully as much resiliency as had the "scant bracket" con- 
struction we held in the Toledo Case to inf ringe. The decree of the 
court below as to the first patent must be afifirmed. 

[ 2, 3 ] 2. Patent No. 860, 1 50 relates not only to store front but to 
showcase construction, and the invention is designed to provide a 
simple, strong, durable, inexpensive, and ornamental connection be- 
tween the glass plates. The device is well enough illustrated by Fig. 3 
of the patent drawings, which is a horizontal section of one of the sug- 
gested forms which the Connecting device may take, although this 
particular form is adapted only to the connection between two aligned 
plates. The device is available for plates at right angles to each other, 
as in corner pièces. 

In the drawing / indicates a 
channeled face plate, 2 the glass 
plates, 3 the flanges projecting 
in opposite directions from the 
channeled plates, overlapping 
and bearing against the outer 
face of the glass plates, 4 a back 
plate with V-shaped wings 5, 
pressing the glass plate out- 
wardly against the flanges of 
the face plate, 6 a' stifïening bar 
fitting into the channeled back 
plate, 7 bolts extending through 
the front and back plates and 
the stifïening bar, and 8 nuts 
engaging the inner ends of the 
bolts and bar, clamping the 
plates in the desired relation. In practice the independent stiiïening bar 
6 may be dispensed with, its place being supplied by a construction of 




DETROIT SHOWCASE CO. V. KAWNEER MFG. CO. 237 

the back plate 4 foUowing, for example, the outlines of the bar 6, 
thereby providing the needed stiffening. As thus far described the 
structure was old in the art. As recognized by the inventor in the 
spécifications of his patent, the only new élément provided by him is 
the so-called "filling strip" 9, provided with inwardly projecting Ranges 
10, between which the bolts extend and against the outer ends of 
which the heads of the bolts bear. The inventor déclares the purpose 
of this filling strip to be "providing a finish for the store front or 
showcase and to prevent tampering with the bolts," saying: 

"Tliis filling strip is adaiJted to be slipped iiito tlie ohiumel of the face plate 
from one end of tlie latter before the face plate is secured in position and 
atter the bolts hâve bren slipped through it, the nuts beiug evenly turned to 
clamp the parts in the desired relation." 

The only claims in suit are Nos. 1 and 2, which read as follows : 

"1. The coiublnation of a channeled front plate, a back plate, a channeled 
filling strip oocupyîng the channel of the front plate and headed fastenlng 
devices extending through the channeled plate and the back plate and havlng 
their heads within the channeled filling strip to be covered by the same. 

"2. ïhe combinatiou of a channeled front plate provided with latéral flanges, 
a back plate of the same and provided with résilient wings, a stiffening part 
engaging the back plate, bolts extending through the channeled front plate, the 
back plate, and the stiffening part, and a channeled filling strip oecupyiiig and 
closing the channel of the front plate and clamped in position by said bolts." 

The second claim differs substantially from the first only in calling 
for "latéral flanges" for the front plate, "résilient wings" for the back 
plate, and a "stiffening part" therefor. The validity of the claims is 
not assailed. The question is thus one of infringement. Defendant's 
structure differs frotn the device of the patent in this: The channel 
of the front plate opens inwardly, instead of outwardly, as in the de- 
vice of the patent ; the heads of the bolts thus being invisible from the 
outside. The channel of the front plate is always open, the heads of 
the bolts Connecting the front and back plates being gripped by the in- 
turned flanges forming the lower edges of the side walls of the chan- 
nel of the front plate. It thus lacks, as a separate élément, the "chan- 
neled fiUing strip" of the patent, which, as aiready said, is the only new 
élément of the claims in suit. The learned District Judge was of 
opinion that the structure was identical with plaintiff's device, "ex- 
cepting that the défendant, by removing the bottom part of what 
plaintifï calls the channel front ])late, has impaired to that extent the 
function which that plate is to perf orm," and that the case is one for the 
application of the rules that an infringer cannot escape liability by 
diminishing or impairing the advantages and functions of the patented 
device, if he retains the substantial fortn, function, and manner of 
opération, nor by forming in one part two éléments of a patented de- 
vice, if the part thus formed secures the same resuit, in substantially 
the same way, as the two éléments. 

But the pivotai question is whether the case presented is merely that 
of making in one part that which before was made in two parts, the 
intégral structure continuing to perform ail the functions of the for- 
mer two-part device, and in substantially the same way, or whether it 
falls within the rule that a combination claim is not infringed if one 



238 250 FEDERAL EBPOETEE 

of its éléments is omitted without the substitution of an équivalent. 
Were plaintiff's invention a broad or primary one, it might be held that 
défendant has merely made intégral what before was made in separate 
parts. But the patent claims, and their range of équivalents, are nar- 
rovir. There was nothing new in concealing the heads of the screws, 
nor in the use of a round central strip. The inventor's only contribu- 
tion to the art was in the form and manner of accomplishing this old 
resuit, viz. by "a channeled fiUing strip occupying [and closing] the 
channel of the front plate." Défendant has but one of thèse éléments. 
If this élément is a front plate at ail, there is no "channeled filling 
strip," and for the sufficient reason that there was no occasion for one. 
Défendant thus has not, as we view it, merely removed the bottom part 
of plaintiff's channeled front plate, nor has he impaired the function 
of that plate, nor retained, the substantial function and opération of 
plaintiff's device, nor secured its resuit in substantially the same way. 
It is very clear that what défendant has done is so to construct his front 
plate as wholly to dispense with the necessity of the function per- 
formed by a filling strip, and so with the filling strip itself. In other 
words, there was no occasion for a filling strip, either to provide a 
finish, or to prevent tampering with the bolts, or otherwise. There 
was thus no infringement. Union Paper Bag Mach. Co. v. Advance 
Bag Co. (C. C. A. 6) 194 Fed. 126, 135, 114 C. C. A. 204 et s;eq.; 
Proudfit Co. V. Kalamazoo Co. (C. C. A. 6) 230 Fed. 138, 144 C. C. 
A. 418. 

This conclusion is not weakened by the fact that in some of its con- 
structions défendant passes the heads of the bolts through washers 
which grip the edges of the channel of the face plate and prevent their 
spreading. The function of the washers is entirely différent from that 
of the "filling strip" of the patent. It also seems not without perti- 
nency that neither defendant's channeled front plate nor its washers 
are "adapted to be slipped into the channel of the face plate from one 
end of the latter before the face plate is secured in position, but after 
the bolts hâve been slipped through it." Such a method of assembling 
defendant's structure is impossible. It follows that so much of the 
decree of the District Court as found the second patent infringed must 
be reversed. 

[4, 5] 3. Unfair Compétition. The basis of this charge, broadly 
speaking, is that plaintiff and its predecessor were the first to make 
an all-metal store front construction, the nearest approach in the prior 
art being métal covered wood ; that the all-metal construction is light- 
er, more artistic, and more easily set, and furnishes greater assurance 
of protection against breakage of the glass, while securing ventila- 
tion, drainage, and other désirable f eatures ; that for its product plain- 
tiff adopted new, original, and artistic designs, also standardizing sizes 
— featuring in its advertising the all-metal charaçter; that plaintiff's 
manufactures were received by the trade' with great favor and hâve 
established a high réputation; that défendant has unnecessarily and 
intentionally copied plaintiff's designs, as respects nonfunctional fea- 
tures, not only in sash rails, division and corner bars, and other parts 
of a store front, but also the store front as a whole, to such an extent 



DETROIT SHOWCASE CO. V. KAWNEEE MFG. CO. 239 

as to niake it impossible for the ordinary purchaser to distinguish be- 
tween plaintiff's and defendant's manufacture, both as to completed 
structure and separate parts ; that défendant is using the word "Al- 
metal" as a trade-name for its product, and that, while defendant's 
name is placed on entire corner and division bars as manufactured, it 
does not appear often enough to be always found on shorter pièces 
sold to the trade. The decree, as respects unf air compétition, restrains 
défendant — ' 

"from maklng, selling, or In any manner using defendant's 'Almetal' store 
front constructions, or parts thereof, or any otlier construction wliich in its 
shape, design, external appearance, and distinctive features, or détails are 
lilie tliose lieretofore sold by the plaintiff [ilhistrated by its catalogue 'Model 
of Complète Construction'], or so similar to said construction that the ordinary 
purchaser would be likely to be deceived into purchasing store front con- 
structions, or partf! thereof, of the defendant's manufacture as for those of 
the plaintiff, and froni advertising the name in any vvay, elther directly or in- 
directly, and from advertising or using as a trade-marU, trade-name, or distinc- 
tive feature the word 'Almetal,' or any word of similar or like import, in 
connection with the sale of store front constructions or parts thereof." (Ital- 
ics ours.) 

Appellant challenges jurisdiction over this branch of the case be- 
cause of the lack of diversity of citizenship and the fact that the suit 
for unfair compétition is not of a fédéral nature. While the author- 
ities are not unif orm, we hâve held ^ that, where a patent has been held 
vaHd and inf ringed, the unfair compétition feature arising out of that 
infringement may be included in an accounting for profits and dam- 
ages, although the parties are citizens of the same district. K-W Igni- 
tion Co. V. Temco Co., 243 Fed. 588, 591, 156 C. C. A. 286. The court 
below, having found both patents valid and inf ringed, had jurisdiction 
to consider the question of unfair compétition as directly incident 
thereto ; y^t think jurisdiction still exists with respect to the sash rail 
patent which we hâve held valid and infringed. But as to defendant's 
sash rail construction, considering it now independently and not as a 
part of a complète window front structure, we think it not the subject 
of damages for unfair compétition; that is, of damages beyond those 
resulting from the mère fact of infringement, and because of the ap- 
parent lack of unnecessary and intentional imitation of plaintiff's de- 
sigfn. Defendant's gutter rail is not ornamental ; its features are mere- 
ly those of utility. It seems to us no more like plaintiff's than con- 
sistent with efficiency of function alone. The retaining strip of both 
plaintiff and défendant take the form of moldings in common use. The 
types of moldings are, however, noticeably différent; in other words, 
we fiind no doser imitation than would naturally be involved in the con- 
struction of the sash rail in such a way as to appropriate plaintiff's 
patent thereon. 

[6-8] We think, also, that no sufficient basis appears for restrain- 
ing the use of defendant's trade-name "Almetal" (not trade-marked; 
as applied to the sash rail, considering it independently, and not as a 

1 Citing Lesfhen Eope Co. v. Broderick, 201 U. S. 16^, 172, 26 Sup. Ot. 425, 
50 L. Ed. 710 ; I.udwigs v. Payson Mfg. Co. (C. C. A. 7) 206 Fed. 60, 65, 124 O. 
C A. 194, and other cases. 



240 250 FEDERAL KEPOKÏER 

part of a complète store front structure. The name itself îs purely de- 
scriptive; it does not of itself indicate origin. Plaintiff would net 
originally hâve been entitled to protection had it adopted it. In fact, 
it was never formally adopted by plaintifï as either a trade-mark or a 
trade-name. Plaintiff is thus not entitled to protection, unless the name 
has been so used as to hâve acquired a secondary meaning, as indi- 
cating plaintiff's product. Kellogg Co. v. Quaker Oats Co. (C. C. A. 
6) 235 Fed. 657, 149 C. C. A. 77, and cases cited. But such, we think, 
is not fairly shown to be the case hère, at least as applied to the sash 
rail treated by itself. True, in plaintiff's earlier publications consid- 
érable stress was laid upon the fact that its construction was ail métal. 
That was at least one of its attractive f eatures ; and while in the later 
catalogues the fact of the construction being ail métal is mentioned, 
it has been made less prominent. The testimony that the trade regards 
the words "Kawneer" and "ail métal" as synonymous cornes only 
from interested witnesses, and so far as it applies to the sash rails, 
considered by themselves, is not persuasive, especially in view of the 
manufacture of all-metal sash rails for several years past by others 
than plaintiff. The District Judge did not regard the use of the word 
"Almetal" as infringing any trade-mark of plaintiff, but only as one of 
the "straws" indicating unfair compétition. While the existence of a 
valid trade-mark is not essential to a right of action for unfair com- 
pétition (Samson Works v. Puritan Mills [C. C. A. 6] 211 Fed. 603, 
608, 128 C. C. A. 203, L. R. A. 1915F, 1107), we think it clear that, at 
least as applied to the sash rail (still considering it independently), the 
case presented does not justify enjoining defendant's use of the trade- 
name "Almetal." 

[9] We are, moreover, of opinion that, under the rule which we 
recognized in the Temco Case, supra, we hâve no jurisdiction over 
the subject of unfair compétition as related to the division and cor- 
ner bars of the second patent, which we hâve held not infringed — at 
least as considered by themselves, and not as a part of a complète store 
front structure. Had the second patent been held invalid, such would 
hâve been the resuit under our décision in Schiebel Toy, etc., Co. v. 
Clark, 217 Fed. 760, 774, 133 C. C. A. 490; and the same resuit seems 
logically to fpllow where, as hère, a patent is held not infringed, for 
we think the logical theory on which (in case a patent has been sus- 
tained) damages for unfair compétition may be considered is that such 
damages are to be treated merely as "aggravation of the inf ringement," 
and recovery by way of aggravation of damages otherwise nonexistent 
would seem anomalous. It therefore seems clear that no relief can be 
given in this case for alleged unfair compétition, either by way of in- 
junction or damages, unless it be on account of the store front con- 
struction taken as a whole. There is much to be said in favor of a ju- 
risdiction, even in the absence of diverse citizenship, to give relief for 
unfair compétition with respect to a unitary or unified structure, the 
élément representing whose major functipn is covered by a patent held 
valid and infringed — and regardless of thé fact that certain remaining 
features of the unified structure hâve been held not to infringe dther 
asserted patents in the same suit. Upon such a case we express no 



BUTTE & SDPBRIOR MINING CO. V. MINERALS SEPARATION, LTD. 241 

Opinion ; we hâve no such case hère. The sash rail is a minor part of 
the unified structure, which includes, in addition to that feature, and 
the features claimed to infringe the second patent, certain qther un- 
patented features. Moreover, we hâve found an aljsence oî unfair 
compétition as respects the sash rail standing alone. While the ques- 
tion is not free from difficulty, we are disposed to the opinion that, 
in this situation and having in mind the basis on wliich relief for unfair 
compétition in a patent infringement suit is made to rest, an assertion 
of jurisdiction to cover the question of unfair compétition in making 
or selling the unified structure would be an unwarranted extension. 

So much of the decree of the court below as relates to unfair com- 
pétition is accordingly reversed, but without préjudice to such right of 
action, if any, as plaintiff may otherwise or elsewhere hâve with re- 
spect to the features not hère passed upon. The record will be re- 
manded to the District Court, with directions to enter a new decree not 
inconsistent with this opinion. The costs of this court, including the 
expense of preparing transcript, will be divided. 



BUTTE & SUPERIOR MINI.NG CO. v. MINERALS SEPARATION, 

Limited, et al. 

(Circuit Court of Appeals, Ninth Circuit. May 13, 1918.) 

No. 3081. 

Patents ©=3328 — Validitt and Infringement — Process — Obe Concentra- 
tion. 

Sulman, Picard and Ballot patent. No. 835,120, for a process of ore con- 
centration by air bubble flotation, while valld as to claims 1, 2, 3, 5, 6, 
7, and 12, liniited to a process uslng any oll or olly llquid having a ijrefer- 
ential afflnity to metalllferous matter lu a proportion aniounting to (nie-half 
of 1 per cent, or less on the ore, and the use of a greater ijuantity of oll 
or of such oily liquid in ore concentration is not an infringement. 

Morrow, Circuit Judge, dlssentlng in part. 

Appeal from the District Court of the United States for the Dis- 
trict of Montana. 

Suit by the Minerais Séparation, Limited, and others, against the 
Butte & Superior Mining Company. From a decree for complain- 
ants (245 Fed. 577), défendant appeals. Reversed and remanded, 
with directions. 

See, also, 237 Fed. 401. 

This is an appeal from the decree of tlie United States District Court foi 
the district of Montana, sustalning letters patent No. 835,120, issued to Sul- 
man, Picard and Ballot on Noveniber 0, lOOf!, for a process of ore concen- 
tration, and adjudglng the appellant hereio to hâve Infringed the same. The 
appcllees, two Brltlsh corporations aiid one domestic corporation, are the 
logul owners of the title to the patent In suit, and ot the rights to profits and 
(hunages for infringement thereof. The appellant is a domestic corporation, 
doing business at Butte, Mont., where the acts of infringement complalned of 
were commltted. 

The suit was eommeneed on October 10, 1013, and a prellminary injonction 
sought. At the heariug on the motion for a prellminary injunctlon the plead- 
iiigs and proceedlnas In the suit of Minerais Sei)uvatlon, Limited, et al. v. 

(gsaFoi- other case'< see same topic & KEY-NUMBER in ail Key-Numbered DJgests & Indexes 
250 F.— -IG 



2i2 250 FEDERAL REPORTEE 

Jnmes M. Hyde, In the United States District Court for the district of Mon- 
tana, were ofdered and received in évidence, and are a part of the record here- 
In. Tliat suit was upon tlie same patent, and the Issues were substantially 
the same as in the présent case. The answer of the défendant set up the 
défense of anticipation and denied infringement. While the cause was at issue, 
but before trial on the merits, the Suprême Court of the United States ren- 
dered lis décision in the Hyde Case, 242 U. S. 261, 37 Sup. Ct. 82, 61 L. Ed. 
286, holding claims 1, 2, 3, 5, 6, 7, and 12 of the patent to be vaUd, and claims 
9, 10, and 11 to be invalid. ïhe plaintifCs filed a supplemental and amended 
blU on May 1, 1917, during the trial of the cas« on the merits, pleading a dis- 
claimer flled by them on Murch 28, 1917, and charglng continued infringement 
of claims 9, 10, and 11 of tho patent, as llmited by said disclaimer, and of the 
remalning claims. 

To the plaintiffs' supplemental and amended bill of complaint défendant 
filed its answer on May 4, 1917, denying infringement and the validity of the 
patent by reason of lack of novelty and invention ; alleged, further, that 
the patent had become wholly void and invalid by reason of the unreasonable 
neglect and delay of the plaintiffs to file a pr<iper or any disclaimer in 
writlng to claims 0, 10, and 11, held to be invalid by the Suprême Court in 
the Hyde Case ; alleged, also, an estoppel against the claim of infringement by 
the use by the défendant of an amount of oil exceeding flve-tenths of 1 per 
cent, on the weight of the ore, basing this défense upon a statement made 
by one of plaintiffs' counsel in the Suprême Court of the United States, in 
the Hyde Ca.se, that the invention described in the patent was not reached 
or practiced until the amount of oil fell to or below flve-temths of 1 per 
cent, on the weight of ore treated by the process. 

Upon the issues thus presented voluminous testimony was taken upon ail 
the questions involved, which, as stated, were substantially the issues in the 
Hyde Case, restated and reeonsidered by the lower court in the présent case. 
The court thereupon entered a decree infavor of the plaintiffs, in accordance 
with the conclusions of the opinion, holding that the plaintiffs were the 
owners of the patent in suit ; that the processes employed by the défendant, 
bofh before and after the flling of the bill of complaint, to and ineludlng 
January 7, 1917, embodied the invention of the patent, and infringed claims 
1, 2, 3; 5, 6, 7, and 12 thereof, and claims 9, 10, and 11, as llmited by said 
disclaimer; and that the processes employed by the détendant from the 
7th day of January, 1917, down to and through the time of the trial, em- 
bodied the invention of the patent, and infringed claims 1, 2, 3, and 12 
thereof, and claims 9, 10, and 11, as limited by the said disclaimer. The de- 
•cree granted a permanent injunction against the further use of such process 
by défendant, and directed that an accounting be hàd for the assessment of 
damages accruing from such use. From that decree the défendant bas ap- 
pealed to this court. 

Thomas F. Sheridan, of Chicago, III, Frederick P. Fish, of Boston, 
Mass., J. Edgar Bull, of New York City, J. Bruce Kremer, h. P. San- 
ders, and Alf C. Kremer, ail of Butte, Mont., and Kurnal R. Babbitt, 
of New York City, for appellant. 

Henry D. Williams, Wm. Houston Kenyon, and Lindley M. Gar- 
rison, ail of New York City, Garret W. McÉnerney, of San Fran- 
cisco, Cal., and Odell W. McConnell, of Helena, Mont., for appel- 
lees. 

Before ROSS, MORROW, and HUNT, Circuit Judges. 



ROSS, Circuit Judge (after stating the facts as above). Notwith- 
standing the strenuous contentions on both sides of this litigation, and 
the very elaborate préparations and able arguments of many distin- 



BUTTE & SUPERIOE MINING CO. V. MINERALS SEPARATION, LTD. 243 

guished counsel, we can but regard the case as a very plain one. To 
start with, the law is too well established, to require discussion or the 
citation of authorities, that the patentee's rights under a patent are 
governed and limited by its valid claims — its spécifications being ref er- 
red to only as illustrative of the true meaning of the claims. It i& 
equally well settled law that the mère resuit of an invention is not pat- 
entable ; nor is f roth, or scum, or pine oil, or any other kind of oil, or 
oleic acid, patentable as such. 

In their spécifications the patentées of the patent in suit déclare that 
their invention "relates to improvements in the concentration of ores, 
the object being to separate metalliferous matter, graphite, and the 
like, from gangue by means of oils, fatty acids, or other substances 
which hâve a preferential affinity for metalliferous matter over 
gangue"; but, of the claims of their patent adjudged by the court be- 
low to hâve been infringed by the appellant, not one spécifies any par- 
ticular kind of oil, although the fifth and sixth specify as one of their 
constituents "a small proportion of oleic acid (which is an acid exist- 
ing in most fats in combination with glycoral), amounting to 0.02-0.5 
per cent, on the ore." And we do not understand it to be contended 
that the appellant uses any oleic acid in its process. 

It is not denied that at the time of the invention in question the affin- 
ity of oil for the metalliferous portion of powdered ore, wheh mixed 
with water, was well known, as well as the further fact that the agi- 
tation of such a mixture with, as well as without, the addition of acid, 
would carry the metalliferous portions to the surface of the mixture 
and the gangue to the bottom ; certainly those f acts could not be suc- 
cessfuUy denied, in view of the numerous références to the prior state 
of the art made in the opinion of this court when this patent was last 
under considération hère, and when the whole patent was by this court 
held void as lacking invention. 214 Fed. 100, 130 C. C. A. 576. That 
judgment was, it is true, reversed by the Suprême Court, 242 U. S. 261, 
37 Sup. Ct. 82, 61 L,. Ed. 286. In doing so, however, the Suprême 
Court held invalid claims 9, 10, and 11 of the patent, each of whicb 
claims was for "a small quantity of oil." So that it is plain the appel- 
lees are not entitled to be protected in the use of "a small quantity of 
oil" of any kind, which, as is obvious, is a wholly indefinite quantity. 

In holding claims Nos. 1, 2, 3, 5, 6, 7, and 12 of the patent valid to 
the extent that it did, the Suprême Court, after pointing out in its opin- 
ion that there were many investigators at work in the field to which 
the process in suit related when the patentées came into it, and that it 
was while engaged in study of prior kindred processes that their dis- 
covery was made, said: 

"While the évidence in the case makes it clear that they discovered the 
final step which converted experiment into solution, 'turned failure into suc- 
cess' [the former patents having used so much oil as to inake its cost prohibi- 
tive — our observation] (The Barbed Wire Patent, 14."} TJ. S. 275, 12 Sup. Ct. 
443, 450, 36 L. Ed. 154), yet the investigations preceding were so Informing 
that this final step was not a long one, and the patent must be eonfined to> 
the resOlts obtained by the use of oil within the proportions often described; 
in the testimony and in the claims of the patent as 'critlcal proportions,'' 
'amounting to a fraction of 1 per cent, on the ore.' " 



244 250 FEDERAL REPORTER 

Amounting to a fraction of 1 per cent, on the ore is very far from. 
saying amounting to e-very fraction of 1 per cent, on the ore. A frac- 
tion is one thing; every fraction is a very différent tliing. It is ob- 
vions, we think, tiiat if the Suprême Court had meant to extend the 
scope of claims 1, 2, 3, 5, 6, 7, and 12 of the patent to 1 per cent, of 
oil on the ore, as is hère contended by the appellees, it would not hâve 
said anything about any fraction of 1 per cent. — certainly there would 
hâve been no necessity for doing so, and certainly the use of such spé- 
cifie language as it employed without a purpose cannot be justly im- 
puted to that great tribunal. That the "critical proportions" "amount- 
ing to a fraction of 1 per cent, on the ore," so protected by the Suprême 
Court in its décision, does not include ei'ery fraction of 1 per cent, on 
the ore, is, we think, very clearly shown by the same opinion, where, 
after describing the prior state of the art, the court said: 

"Into this fleld of investigation at this state of its development came tlie 
patentées of the patent in suit. They were experienced metallurglsts of 
London, of inventive genius and with iinancial rcsources, and tliey entered upou 
an investigation of tlie processes of oil concentration of ores, wliich was con- 
tinued tlirougli several years, and consisted of a very extended séries of ex- 
periments, in wiiicii tlie quantities of oil, of water, and of aeid used, and the 
extent and eharacter of the agitation of the mass under treatment resorted 
to, were varied to an almost unparalleled extent as to eacli factor, and the 
results were carefully tahulated and interpreted. It was while pursuing a 
comprehensive investigation of this eharacter, having, as the évidence shows, 
the spécial purpose in mind at the time to trace the efCect on the results of 
the proeess of a réduction to the vanishing point of the quantity of oil used, 
that the dîscovery embodied in the patent in suit was made. The experiment- 
ers were working on the Cattermole 'métal sinking proeess' as a basis, when 
it was discovered tliat the granitlation on which the proeess depended prac- 
tically ceased when the oleic aeld (oil) was reduced to about five-tenths of 1 
per cent, 'on the ore.' It was observed, however, that, as the amount of 
oleic aeid was further reduced and the granulation dimlnished, there was an 
inerease in the amount of 'float froth' which collected on the surface of the 
mass, and that the production of this froth reaehed its maximum when 
about one-tenth of 1 per cent., or slightly less, 'on the ore,' of oleic aeid was 
used. This froth, on collection, was found to consist of air bubbles, modified 
by the présence of the minute amount of oil used, and holding in mechanical 
suspension between 70 per cent, and 80 per cent, of the total minerai content 
of the mass treated. It was promptly recognized by the patentées that this 
froth was not due to the libération of gas in the mass treated by the action 
of the dilute aeid used, and its formation was at once attributed in large part 
to tne présence of the air introduced into the mixture by the agitation, which 
had been resorted to, to mix the oil with the partieles of cnished ore, which 
air, in bubbles, attaehed itself to the minerai partieles, slightly eoated as they 
were with what was necessarily an infinitésimal amount of oil, and floated 
them to the surface. The extent of the agitation of the mass had been in- 
ereased as the experiments proeeeded, until the 'séries of Gabbett mixers, 
fltted with the usual bafHes, were speeded at from 1,000 to 1,100 révolutions 
I)er minute.' A eareful considération of the record In this easo convinces us 
that the facts with respect to the proeess of the patent in suit are not over- 
stated by the plaintift's' witness, Adolf Llebman, au expert of leaming and 
expérience, vi'hen he says in substance: 'The présent invention differs essen- 
tially from ail previous results. It is true that oil is one of the substances 
used, but it is used in quantities much sm aller than was ever heard of, and 
It produces a resuit never obtained before. The minerais are obtained in a 
froth of a peculiar eharacter, consisting of air bubbles which in their coverins 
film hâve the minerais imhedded in such manner that they form a complet:' 
siu'face ail over the bubbles. A reniarkable fact with regard to this froth i.-; 



BUTTE & SCPERIOR MINING CO. V. MINERALS SEPARATION, LTD . 245 

that, allhough the very slight and ensily destructible air bubbles are covered 
with a heavy minerai, yet the froth Is stable and utterly dltï'erent from any 
froth known before, being so permanent In character that I bave personally 
seen it stand for 24 hours wlthout any change having taken place. The 
slmplicity of the opération, as eompared with the prior attempts, Is startllng. 
AU that has to be done is to add a minute quantity of oll to the pulp, t» 
which acid may or may not be added, agltate for from 2% to 10 minutes, 
and then after a few seconds coUect from the surface tbe froth, which will 
contain a large percentage of the minerais présent in the ore.' It is not 
necessary for us to go into a detailed examination of the process in suit to 
distlnguish it from tbe processes of the patents relied on as anticipations, 
convinced as we are that the small amount of oll used malles it clear that 
the lifting force which scpai'ates the metallio particles of the pulp from the 
other substances of it is not to be found principally in the buoyancy of the 
oil used, as was the case in prior processes, but that this force is to be 
found, chiefly, in the buoyancy of the air bubbles intr<iduced into the mix- 
ture by an agitation greater than and différent from that which had been 
resorted to before, and that this advance on the prior art and the resulting 
froth concentrate so différent from the prodnct of other processes make of 
it a patentable discovery as new and original as it has proved useful and 
cconomical." 

Nothing, it seems to us, can be clearer from the foregoing quota- 
tiens from the opinion of the Suprême Court than that it did not in- 
tend to extend the monopoly of the patent in suit to the use of 1 per 
cent, of oil on the ore; for it, in effect. thereby distinctly déclares and 
adjudges that the discovery of the appellee "experimenters" only rose to 
the dignity of invention when they ascertained that the desired results 
could be and were obtained by the use of five-tenths (one-half) of 1 
per cent, of oil on the ore, writh still better results as the quantity was 
reduced, to the vanishing point at less than one-tenth of 1 per cent. 
The quantity of oil that gave birth to the invention — five-tenths (one- 
half) of 1 per cent, on the ore (at which point no more granulation ex- 
ists) — to the lesser and extrême hmit of the minute quantity (less than 
one-tenth of 1 per cent.) at which the desired resuit ceases are the "crit- 
ical proportions" "amounting to a (Italie ours) fraction of 1 per cent, 
on the ore," to which the appellees' patent is "confined" by the Suprême 
Court, as we understand its opinion. 

And that is just what appears from the présent record was the con- 
tention of the présent appellees before the Suprême Court on the ar- 
gument of their appeal from the judgment of this court holding that 
there was no invention in what they did ; for it is undisputed that on 
the argument of that appeal this colloquy occurred between two of the 
justices and two of the attorneys for the then appellants and the prés- 
ent appellees: 

"Mr. Justice McKeynolds: I would llke to ask you when in this process 
of reducing oil your invention came into existence. 

"Mr. Kenyon: At about one-half of 1 per cent, of oll. 

"Mr. Justice McReynolds: Before you got to the one-half of 1 per cent, did 
you havo any invention? 

"Mr. Kenyon: We v^'ere passing from the région of Cattermole, which was a 
distinct — 

"Mr. Justice McReynolds: I want to know when your Invention came into 
existence. 

"Mr. Kenyon: This invention was not reached, I should say from those 
figures, until about 0.5 — that is one-half of 1 per cent. — of oil was reached. 



246 250 FEDERAL BEPOETEK 

"Mr. Justice McReynolds: At 1 per cent, you had no Inventlonï 

"Mr. Kenyon: No. 

"Mr. Justice McReynolds: At one-balf ot 1 per cent, you did hâve inventlonï 

"Mr. Kenyon: It began to corne ; remote, but it began to corne. At 0.3 of 1 
per cent, the flow vastly Increased. At 0.1 of 1 per cent, tbe flow again 
vastly increased. 

"Mr. Justice McKeynolds: When this flow is more than one-lialf ol 1 per 
cent, of oll it does net infringeî 

"Mr. Kenyon: It does not tnfringe. 

"Mr. Justice Pitney: Wtiat bave you to say in answer to vs'hat Mr. Scott 
said tbe other day, to the efEect that 1.8 per cent., or perhaps more, of oïl 
would give the same resuit with increased agitation? 

"Mr. Williams: Absolutely no. 

"Mr. Kenyon: It would not. 

"Mr. Justice Pitney: I understood him to say so yesterday, and I supposed 
there was something in the record to justify it. 

"Mr. Kenyon: Nothing; that wUl be a part of my argument" 

It results, from the views above expressed and from the similar ones 
expressed in the concurring opinion of Judge HUNT, that the decree 
appealed from must be and is reversed, and the case remanded, with 
directions to the court below to so modify its decree as to accord with 
the opinions of the majority of this court — ^the appellant to recover its 
costs on this appeal. 

HUNT, Circuit Judge (concurring). I will briefly state the ground 
upon which my concurrence rests : 

The Suprême Court, in sustaining the claims, carefuUy noted those 
which were limited to a fraction of 1 per cent,, and the décision ex- 
pHcitly confined the patent to the results obtained by the use of oit 
within the proportions often described in the testimony and in the 
claims. Claims 1, 2, and 3 use the language, "amounting to a fraction, 
of 1 per cent, on the ore." Claims 5, 6, and 7 express amounts, per- 
centages on the ore. Claim 12 uses the words of limitation, "amount- 
ing to a fraction of 1 per cent, of oil on the ore." Claims 9, 10, and 
11 make no référence to a fraction of 1 per cent., but do contain the 
words, "a small quantity of oil." 

The essence of the invention was in the use of this extremely small' 
fraction of 1 per cent., and the Suprême Court, while sustaining the 
fraction of 1 per cent, claims, held invalid the small quantity claims, 
9, 10, 11, because they were too broad. No monopoly could be given 
on the use of a small quantity of oil for that was old. It was new,, 
however, to avoid the use of larger quantities. The patent must be 
confined to the use of critical proportions. Now, keeping in mind that 
by the décision the court has limited the invention to the critical pro- 
portions often described by the testimony and in the claims, we natural- 
ly ask: What are the critical proportions described in the spécifica- 
tions ? Page 1, line 79, of the spécification says : 

"To this is added a very small proportion of oleic acid (say from 0.02 per 
cent to 0.5 per cent on the weight of the ore)." 

And on line 96 we hâve : 

"The minimum amount of oleic acid which can be used to eftect the flotatlon. 
of the minerai in the form of froth may be under 0.1 per cent of the ore, but. 
tbis proportion has been found suitable and economicaL" 



BUTTE & SUPERIOK MININS CO. V. MINEKALS SEPARATION, LTD. 247 

We thus hâve given to us one-half of 1 per cent, or less as the crit- 
ical proportion described — preferably one-tenth of 1 per cent, is to be 
used. 

We also ask : What is the évidence wherein there is of ten described 
the "critical proportion"? A summary of it is that it is very nearly 
one-tenth of 1 per cent, or two-tenths of J. per cent, as may be required 
for particular ore. AU through the évidence it appears that minute 
and critical amounts of oil are to be used as necessary to make the pro- 
cess successful. From one pound of oil to the ton of ore (five-hun- 
di-edths of 1 per cent.) to four pounds per ton (two-tenths of 1 per 
cent.) were the limits in practical work as stated by witnesses. 

Again, when counsel had the coUoquy (quoted in the opinion of 
Judge ROSS) with the Suprême Court, the guiding thought évident 
in the mind of the inquiring justices was to stamp précision upon the 
point when invention in the process began to appear. With apparent 
definite purpose of meeting the interrogatories, plaintifï told the court 
that "invention" began to come when in the descending uses of per- 
centages of oil as small a quantity as five-tenths of 1 per cent, was used, 
and was first présent when three and two-tenths of 1 per cent, was 
used. Of course, a court should cautiously consider a response often 
quickly made by counsel in answer to questions put from the bench 
lest an injustice may foUow by attaching undue weight to an isolated 
argumentative answer. But in this matter we are earnestly trying. to 
gather the scope and accurate meaning of the expressed thought of the 
court. We may therefore refer to the fact that the exact position of 
tlie plaintiff as to the invention was called for, not once, but twice, 
not generally, nor indirectly, but positively, simply and unequivocally. 
Hence, in the controversy as to the true interprétation of the opinion 
the questions put and answers given may be fairly resorted to, not as 
conclusive at ail, but as aids toward a better understanding of the 
statement of the limitations of the claims of the patent and of the 
définition of the invention included in its language. 

Nor do I think there is ground for saying that discrimination was 
had between known oils — whether vegetable, minerai, or animal. To 
oily liquids which hâve a "preferential affinity to metalliferous mat- 
ter" must the plaintiffs be held, and in using kérosène or fuel oil de- 
fendants are but employing oils which the patents authorize the use of -, 
and when défendants use proportions beyond the critical ones of oil — 
not oleic acid, but other oils — they are not infringing. Oils doubtless 
vary in being adaptable for use. Some will probably secure more froth 
than others, and oil formulée may in their ingrédients dépend upon 
the particular ore to be treated and upon the économie relationship to 
the problem under solution. But the froth developed in using the 
minute quantities of oil is, I think, essentially of a character like the 
froth shown when différent quantities of oil are used — the différence 
being largely by reason of a spécial quantity or kind of oil or the spécial 
extent of the agitation applied. The experiments made before us prove 
this. 

In the Cattermole process the froth was held to be distinguishable 
from the froth produced in the patented process of the critical pro- 



248 2Û0-FEDERAL REPORTER 

portion of oil by the fact that certain remarkable and great results corne 
from tlie use of the critical proportion which were not obtained when 
the quantity used in the Cattermole process was employed. By using 
the critical proportion of oil as defined, patentées get the maximum 
froth. They hâve discovered a process — ^^not a froth — and the process 
is limited to the use of oil in the specified critical proportion. 

The sequel of thèse views is that, inasmuch as défendants keep out 
of the limits made for the plaintiff by the décision of the Suprême 
Court by using more than the critical proportion, they do not use plain- 
tiflf's process. 

MORROW, Circuit Judge (concurring in part and dissenting in 
part). I concur in the opinion of the majority of the court that the 
decree should be reversed, but I do not concur in the direction that the 
bill be dismissed. I am of opinion that the use of an oil or oily liquid 
in défendants' séparation process in a quantity not amounting to more 
than a fraction of 1 per cent, on the ore is within the express terms 
of claims 1, 2, 3, and 12 of plaintiffs' patent, and is an infringement 
of such patent. But I am of opinion that the use of oil or oily liquid 
in a quantity amounting to more than a fraction of 1 per cent, on the 
ore is not within the terms of claims 1, 2, 3, and 12, and is therefore 
not an infringement upon plaintiffs' process, and that a decree should 
be entered accordingly. 

The direction of the Suprême Court in Minerai Séparation, Ltd., v. 
Hyde, 242 U. S. 261, 37 Sup. Ct. 82, 61 h. Ed. 286, is that : 

"The patent must be confined to the results obtained by the use of oil with- 
in the proportions often described in the testimony and in the daims oi" 
the patent as crlticai proportions, amounting to a fraction of 1 per cent, on 
the ore." 

The term "critical proportions" is not used in the claims of the pat- 
ent, but such proportions were described in the testimony in the Hyde 
Case as the application of a small but exact quantity of oil to différent 
ores and always within the range of the treatment of "a fraction of 
1 per cent, on the ore," never to the treatment of différent ores within 
the range of "one-half of 1 per cent.," except in the use of oleic acid 
and that upon certain ores such as Broken Hill ores. The : application 
of the term "critical proportions" in the use of oil on ores generally 
within a range of "one-half of 1 per cent." was discovered by counsel 
for appellant in this case, and so far as appears from the record was 
revealed to the public for the first time in this court. 

The colloquy between Mr. Justice McReynolds and Mr. Kenyon,, 
counsel for appellant in the Suprême Court in the Hyde Case re- 
ferred to by Judge ROSS in his opinion related to the use of oleic 
acid on Broken Hill ores, concerning which I do not understand that 
there is any controversy. I think the direction of the Suprême Court 
that "the patent must be coniîned to the results obtained by the use 
of oil within the proportions * * * 'amounting to a fraction of 
1 per cent, on the ore,' " means just what it says, and that within such 
proportions the process described- in the patent is held by the Suprême 
Court to be a valid discovery protected by the spécifications and claims 



BDTTE & SUPERIOK MINING CO. V. MINEEAL8 SEPARATION, LTD. 249 

numbered 1, 2, 3, and 12. The Suprême Court does not say that the 
patent niust be confined to the oleic acid claims (claims 5, 6, and 7), 
nor does it say that the other claims of the patent must be confined to 
the use of oil in the fraction mentioned in those claims. Had the Su- 
prême Court intended that the scope of the patent should be confined to 
the use of oil in the proportion not to exceed one-half of 1 per cent, 
on the ore, it would certainly hâve said so in so many words, and 
would not bave left it to be inferred that the patent must be confined 
to results obtained by the use of oil in such proportions as are limited 
in claims 5, 6, and 7. For what purpose does the court hold claims 1, 
2, 3, and 12 valid? Manifestly, because thèse claims provide for the 
use of oil in the proportions "amounting to a fraction of 1 per cent. 
on the ore" ; that is to say, upon ores generally. 

The spécifications mention the fact that the ores were not ail alike, 
and that difi^erent ores may require the use of différent proportions 
of oily material in order to secure the desired séparation of metallif- 
erous matter from the gangue by the production of a froth. The Su- 
prême Court commenting upon this variation in the requirements of 
the process said : 

"Such variation of treatment must be witliin the scope of the claims, and 
the certainty which the law re(iuires in patents is not s;reatcr than is reuson- 
able. having regard to their snbject-matter. The composition of ores varies 
intinitely, each one presenling its spécial problem, and it is obviously Impossi- 
ble to specify in a patent the précise treatment which would be most success- 
ful and economical in each case. The process is one for dealing wlth a 
large class of substances and the range of treatment within the terms of 
the claims, while leaving something to the skill of persons applying th(ï 
invention, is clearly sutficiently definite to guide those skilled in the art to 
its successful application, as the évidence abundantly shows." 

The use of oleic acid on Broken Hill ore was the oil and the ore of 
the discovery, and the proportion of the oil used is described in claims 
5, 6, and 7, but how about the use of other oils on other than Broken 
Hill ores? The proportions required for oleic acid on Broken Hill 
ores had been determined by actual tests, but other oils and other ores 
had not been fully tested and the application of the process niight re- 
quire a différent proportion of oily material upon a diflferent class of 
ores. To meet such a contingency, claims 1, 2, 3, and 12 call for the 
use of an oil or oily liquid "amounting to the fraction of 1 per cent, 
on the ore." Furthermore, in declaring claims 9, 10, and 11 invalid, 
the Suprême Court clearly did so because such claims were not con- 
fined to the use of oil "amounting to a fraction of 1 per cent, on the 
ore." The claim was for the use of "a small quantity of oil," which 
might be a quantity more than "a fraction of 1 per cent, on the ore." 

The validity of the other claims in controversy having been sustained 
upon their limitation of the use of oil within the proportion "amount- 
ing to a fraction of 1 per cent, on the ore," it followed that claims 9, 
10, and 11 were held invalid because they were not so confined, and 
were therefore too broad. The disclaimer accordingly disclaims from 
claims 9, 10, and 11 of the patent "any process of concentrating pow- 
dered ores, excepting where the results obtained are the results ob- 



250 250 FEDERAL KEPOBTEB 

tained by the use of oil in a quantity amounting to a fraction of 1 
per cent, on the ore." Such language was strictly in accordance with 
the décision of the Suprême Court, and I think a sufficient rejection 
of the excess from the invention claimed, leaving the patent in the 
form limited by the opinion of the Suprême Court. 

With respect to the objection that the disclaimer was not filed in 
time, the mandate of the Suprême Court became effective January 
13, 1917, decreeing the patent to be invalid as to claims 9, 10, and 11, 
but valid as to the other claims in issue. On March 28, 1917, the 
plaintiffs filed their disclaimer, some time before the right to pétition 
for a rehearing in the Suprême Court had expired. Considering the 
importance of the procédure to be followed, the résidence of the pat- 
entées in another country, and the conséquent delay in communica- 
tion, the date of filing was not unreasonably delayed. 



MEOCANO, Limited, v. JOHN WANAMAKEE, NEW YORK. 
(Circuit Court of Appeals, Second Circuit. Marcli 24, 1918.) 

No. 40. 

1. Patents €=>327— Suit for Infeingement — Pbiob Adjudication. 

A decree for infriugement against a manufacturer is not concluslve 
upon a purcliaser in a pending suit against him, even thougli tlie manu- 
facturer is taking part in the défense. 

2. Appeal and Rkbor <S=>1175(7) — Appeal peom Inteblocutoey Obdeb — En- 

TBY or Final Deceee. 

If in any case an appellate court, on an appeal from an order granting 
a preliminary injunctiou, may enter a decree for complalnant on tlie 
merits, tlie power is limited to cases in which the court can see that 
the whole Issue can be disposed of at once, without injustice to the parties. 

Appeal from the District Court of the United States for the South- 
ern District of New Yoric. 

Suit in equity by Meccano, Limited, against John Wanamaker, New 
York. From an order granting a preliminary injunction, défendant 
appeals. On motion of complainant for decree on the merits. De- 
nied. 

This was a motion for a "décision on the merits of this cause*' by thi.s 
court under the following circunistauces: A suit was brought in the District 
Court for the Southern District of New ïork for an injunction for infringe- 
ment of a copyright, and of a patent, and for unl'air compétition in the manu- 
facture of a mechanical toy in absolute imitation of the plaiutifC's. The 
plaintifC applied for and got an injunction pendente lite (241 Fed. 133), from 
which the défendant appealed. That appeal is still pending undetermined in 
this court Meanwhile the plaiutifC had in the District Court re<iuired the 
défendant to answer certain interrogatories, by which It appeared that the 
défendant procured from one Wagner the toys which it sold in alleged un- 
fair compétition and in violation of the patent, and also the "manuals" which 
went with the toys and explained their uses, which are alleged to infringe 
the copyright. The interrogatories further showed tliat Wagner had agreed 
to hold the défendant harmless for any sales of the toys and manuals, and 
that in pursuance of that undertaking he had taken a share in the défense 

<g=»For other cases see same topio & KEY-NUMBBR in ail Key-Numbered Dlgests & Indexes 



MECCANO, LTD., V. JOHN WANAMAKER, NEW YORK 251 

irf this suit. WhilP. it did' not appear exactly what tlmt share waa, it may be 
assumed, for the purposes of the motion only, that Wapîner lias assumed the 
ehlef conduct of the case, and that the défendant remains only formally rep- 
re.«ented. 

The plalntlfif sued Wagner In Ohlo upon the three same causes of equity 
and obtalned a decree upon ail. I^ater an appeal was taken to the Circuit 
Court of Appeals for the Sixth Circuit, and the decree was afflnned except 
as to the patent, which was declared invalid, and which the plaintiff has 
now withdrawn from this suit. No final decree has been entered, and the 
Ohlo cause now stands for an accounting in the District Court. This motion 
Is upon the record in the Ohio suit, which is made a part of the moving pa- 
pers, and it présupposes that this court may pass a final decree for the plain- 
tiff upon the appeal from the injunctlon pendentc lite, upon the assumptlon 
that that record is a complète estoppel agalnst the défendant hère and leaves 
open no Issues for détermination between the parties. 

Reeve Lewis, of Washington, D. C, and C. A. L. Massie and Ralph 
L. Scott, both of New York City, for the motion. 
H. A. Toulmin, of Washington, D. C, opposed. 

Before ROGERS, Circuit Judge, and LEARNED HAND and 
MAYER, District Judges. 

LEARNED HAND, District Judge (after stating the facts as 
above). We pass the question of practice whether this court, under 
the doctrine of Mast, Foos & Co. v. Stover Mfg. Co., 177 U. S. 488, 20 
Sup. Ct. 708, 44 L. Ed. 856, may enter a decree for the plaintiff upon 
such an appeal as that now pending. Mast, Foos & Co. v. Stover Mfg. 
Co., supra, was a case where the bill was dismissed, and no case has 
so far held that the plaintiff could obtain an affirmative decree. As we 
think the motion must be denied upon the merits, we leave open the 
question whether the plaintiff may in any event so terminate the litiga- 
tion. 

We further disregard the objection that the Ohio decree is still 
only interlocutory, and therefore under gênerai principles cannot in 
any event constitute an estoppel. How far this rule may be changed 
when there has been a décision upon an appeal from such a decree, 
and the cause has been remanded to the district court, we do not say. 
The reason for the rule limiting the conclusiveness of interlocutory de- 
crees does not apply; i. e., that the decree still remains in gremio, since 
the District Court has no longer any power to modify so much as has 
been affirmed by the Circuit Court of Appeals. For the purposes of 
this motion, we may assume that, in so far as concerns the matters be- 
fore the Circuit Court of Appeals, the issues hâve been finally and 
conclusively determined. 

[1] Nor, again, do we consider how far the effect of that decree 
may be to entitle the plaintiff to an injunction against the défendant 
against selling any of the toys or manuals which it may buy from 
Wagner, rhis is a question which will arise upon the appeal from 
the injunction pendente lite, and need not dépend in any sensé upon the 
estoppel of the défendant by that decree. It might, for example, be 
held under an extension of the doctrine of Kessler v. Eldred, 206 U. 
S. 285, 27 Sup. Ct. 611, 51 L. Ed. 1065, that the purchase of toys and 



252 250 FEDERAL REPORTER 

manuals from Wagner, which he had been enjoined from selling, if not 
in actual contempt of that decree, was at least in dérogation of the 
plaintiff's rights established thereby, and thus a tort against it, re- 
gardless of the defendant's personal right to sell toys and manuals, if 
bought from others, or to manufacture them itself and sell them with- 
out the co-operation of Wagner. What we hâve before us is whether, 
conceding ail this, the plaintiff has established, or can establish, in the 
Ohio suit, any estoppel which will generally conclude the défendant up- 
on ail the issues raised between itself and the plaintifï by the pleadings 
in this suit. 

We think it clear that that decree cannot hâve any such effect, and 
Judge Ray so ruled in Van Epps v. International, etc., Co. (C. C.) 124 
Fed. 542. The cases which generally corne up are those in which in the 
first suit the manufacturer has intervened to protect the customer, and 
it has been held that the decree then entered will be a good estoppel in 
the second suit instituted against him individually. We may assume 
that Wagner's intervention hère is of such a kind as would create a 
good estoppel against him in any subséquent case. The case at bar, 
however, is exactly the reverse, and, unless ail the issues are the 
same in each case, we should not dispose of the suit in this summary 
manner. It is apparent that some of the issues are différent from those 
litigated in Ohio; they involve, not only the defendant's right to sell 
Wagner's toys and manuals, but any others which it may procure 
elsewhere. We hâve no right to assume, because the défendant allows 
Wagner to hâve the chief conduct of the défense, that it has abandoned 
ail rights, except that of getting the toys and manuals from him. 
While we do not hold that the decree is an estoppel, taken strictly, 
even as to those toys and manuals, we may even suppose that, Wagner 
having now intervened, it is such. Still it would mâke no différence 
in the resuit of this motion, unless the issues hère litigated were coex- 
tensive with the issues litigated in the Ohio suit. 

[2] At best the rule in Mast, Foos & Co. v. Stover Mfg. Co., supra, 
is limited to those cases in which the court can see that the whole is- 
sues can be disposed of at once without injustice to the parties. What- 
ever may be the resuit hère, it is apparent that the case involves more 
than can be so decided. 

The motion is denied. 



PANTHEB EUBBEE MFG. CO. V. I. T. 8. EUBBEB CO. 253 

PANTHER EUBBEB MFG. CO. v. I. T. S. RUBBER CO. 

(Circuit Court of Appeals, Slxth Circuit March 15, 1918.) 

No. 2962. 

Patents ©=328 — Infbihqemknt — Rtjbbeb Heel Attachment. 

ïhe Ferguson patent, No. 638,228, for a rubber heel attachment for boot 
and shoe heels, has for an essential élément and controUing feature a 
raised marginal portion on the upper side of the tip, leaving a substan- 
tlal dépression in the center. As so construed, held net intringed. 

Appeal from the District Court of the United States for the East- 
ern Division of the Northern District of Ohio; John H. Clarke, Judge. 

Suit in equity by the Panther Rubber Manuf acturing ' Company 
against the I. T. S. Rubber Company. Decree for défendant, and 
complainant appeals. Affirmed. 

For opinion below, see 234 Fed. 377. 

Hull, Smith, Brock & West, of Cleveland, Ohio (Hubert Hovvson 
and I. L. Broadwin, both of New York City, of counsel), for appel- 
ant. 

F. O. Richey, of Elyria, Ohio, and Charles A. Brown, of Chicago, 
111., for appellee. 

Before KNAPPEN and DENISON, Circuit Judges, and KILDITS, 
District Judge. 

PER CURIAM. Appellant, complainant below, charged the défend- 
ant, the appellee, with infringement of the Ferguson patent, No. 638,- 
228, granted December 5, 1899, for improvement in rubber heel at- 
tachments; this patent having been assigned before the commence- 
ment of this action to complainant. The défendant raised the usual 
issues of anticipation, prior use, and a déniai of validity of the Fergu- 
son patent and of infringement thereof. Interrogatories were allowed 
and answered on both sides, and thereupon the matter came before 
the court below on a motion for temporary injunction and upon de- 
fendant's motion to dismiss the bill. The District Court denied the 
motion for preliminary injunction, and dismissed the bill upon defend- 
ant's motion and the évidence before it. A mémorandum was filed, 
which indicates that the court below was of the opinion that no in- 
fringement was shown. 

Examining the record, exhibits, and affidavits, this court finds itself 
compelled to concur with the lower court. The issue, by pleading and 
interrogatories, was narrowed to claim No. 1 of the Ferguson patent, 
which reads: 

"A rubber heel attachment for boot and shoe heels, consisting of a heel sec- 
tion or body 1 molded to a concavo-convex form and provided with a raised 
marginal portion and openings therethrough, substantlally as specified." 

A reading of this claim upon the spécifications and drawings of the 
patent leaves no doubt that the "raised marginal portion" with which 
the lift is to be provided as an essential élément of claim 1 refers to 

^=:3For otlier cases see same topic & KElY-NUMBEia in ail Key-Numbered Dlgests & Indexes 



254 250 FEDERAL KEPORTEB 

-a margin on the upper side of the lift, left after the upper side by cut- 
ting away or in the opération of molding is provided with a substan- 
'dal dépression, which dépression, entirely inclosed by a raised portion 
when the lift is engaged to the heel by the ordinary fastening, efïects 
some adhésion through the povver of suction. We concur in the theory 
of the court below that the claim of the complainant that the centrally 
located shallow channels or scorings in the shape of a shield in the rub- 
ber heel manufactured by tlie défendant results in a raised marginal 
portion is "entirely fanciful and impossible." There is too much em- 
phasis placed upon the "raised marginal portion" in Ferguson's spécifi- 
cations, drawings, and claim to avoid the conclusion that that is an im- 
portant and controlling feature of his invention. The drawings indi- 
cate that the raised margin incloses a very distinct dépression, the depth 
of which is substantial. Upon the fact that the défendant, without de- 
pressing the upper surface of its lift, scores that surface with a shal- 
low and very slender channel in the gênerai outline of the lift itself, 
which channel incloses two lines of equally shallow and narrow scor- 
ings crossing each other at right angles, the whole forming a figure not 
unlike a shield with a cross, is predicated the claim of infringement. 
Not only are thèse two constructions very dissimilar in appearance, 
but it is not conceivable that defendant's scorings can perform the 
same functions claimed for complainant's dépression inclosed by the 
continuous "raised marginal portion." Complainant does indeed in- 
sist that Ferguson was original in bringing in the élément of a con- 
■cavo-convex lift, but the patent has no claim for that feature, except 
in combination with the élément of a "raised marginal portion." 

We find it unnecessary to pass upon the propriety of the practice, 
followed below, of considering the question of infringement upon mo- 
tion in advance of final hearing, for no conflict of fact was presented, 
no préjudice has resulted, and plaintifï desires the case disposed of on 
the présent appeal. 

The decree of the District Court is afiBrmed, with costs. 



FEATHEEEOaE BOBBEE CO. V. MILLER EUBBEE CO. 255 

TEATHEREDGE KUBBEE CO. v. MILLER RUBBER CO. et al. 
(District Court, N. D. Oliio, E. D. June 26, 1917.) 

No. ass. 

1. Patents ®=>53 — Anticipation — Priob Use. 

Where the défendant In an Infringement suit relied on thc défense of 
anticipation, lie must show that the alleged prier use was more than mère 
expérimenta tioti. 

2. Patents <S=328 — Infringement — Disclosuee. 

The Willis and Félix patent, No. 1,045,234, for a process for rubber 
sponges, held invalid ; the disclosure oit the patent not being sufficient to 
enable one skilled in the art to manufacture sponges wlth commercial 
success. . 

In Equity. Suit by the Featheredge Rubber Company against the 
Miller Rubber Company and another. Decree for défendants. 

Fay, Oberlin & Fay, of Cleveland, Ohio, and Brown, Nissen & 
Sprinkle, of Chicago, 111. (Frank T. Brown and Arthur L. Sprinkle, 
both of Chicago, 111., and Jesse B. Fay, of Cleveland, Ohio, of counsel), 
for plaintiff. 

Melville Church and William F. Hall, both of Washington, D. C, 
for defendïints. 

KILLITS, District Judge. Our work has been too heavy since the 
submission of this case a few weeks ago to permit an extended analy- 
sis to be made by the court before vacation. We deem it sufficient if 
we présent at least the reasons impelling us to the conclusions reached. 
Counsel who are directly interested in the case are able to fiU in this 
skeleton mémorandum with the détail of fact and law necessary to 
make it complète. 

We do not think the référence to the Forster British patent of 1868 
suggests an anticipation of Willis and Félix, and so far as that référ- 
ence is concerned the défense fails. It is conceded that nothing prac- 
ticable came of the Forster invention ; the patent joining the crowded 
limbo of inutile grants. We feel compelled, from the very illuminafmg 
testimony of the witness Weber, to hold that the term "steam heater" 
does not necessarily or even probably refer ta a vulcanizer in which 
both the pressure and heat of steam are used, and we are inclined to 
agrée with Weber that the context and the resuit which Forster es- 
tablishes and was seeking suggest that he had in mind a vulcanizer in 
which the heat of steam only was used. 

Our considération of the patent in question leads to the conclusion 
that the crucial step in the process, the step in which, if at ail, invention 
abides, one which distinguishes this process and makes a decided ad- 
vance in the art, is the curing under steam pressure with a view of 
thereby preserving intact the walls of the cells f ormed by the expansion 
of the blowing material until they can be mechanically ruptured. We 
are convinced of the superiority of the product had through mechani- 
cally rupturing the cells over that attained by perforation thereof 
through the escape of expanding gases in the process of curing, and 

©3>For otUer cases see Bame topio & KEY-NUMBER in ail Key-Numbered Dlgests & Indexe* 



256 250 FEDERAL REPORTER 

it is altogether in this considération tliat we proceed to' examine the 
patent and the défenses interposed. 

We are unable to find. either, that the défense of anticipation has 
been sustained by proof of the manufacture of rubber sponges by the 
Camp and Fauhless people, for the reason that the pressure of steam 
in the factory at Ashland seems to hâve been utilized to a very limited 
extent, if at ail, in the process of curing; at any rate, the proof does 
not support that clarity of judgment necessary to sustain défense of 
anticipation. 

[1] The balance of the first défense, that which dépends upon the 
work donc by the Goodrich Company, needs to be considered in connec- 
tion with the second défense, namely, that there is an insufficient dis- 
closure in the patent to enable one skilled in the art to follow the pro- 
cess. The évidence touching the work done in the Goodrich factory in 
1903 leads inevitably to the conclusion, as we view it, that the steps 
there taken were identically those of the claim (4) of the Willis and 
Félix grant, treated by counsel herein as typical. The testimony on 
cross-examination of plaintifï's owh witnesses left no doubt of this. 
Sponges were made by taking a rubber compound, curing it in an open 
steam vulcanizer under pressure substantially equal to that in the com- 
plainant's process, following by a mechanical breaking down through 
rollers and a trimming substantially identical with complainant's pro- 
cess. Indeed, if it could be established that the visit of patentée Félix 
to the Goodrich plant on another errand at the time that the sponges 
were being made in Akron had resulted in his gaining a knowkdge of 
the process then used, it seems that no one could say that it was there- 
after open to Félix to claim the process of his patent as his invention. 

That the Goodrich people made a physically successful sponge is con- 
clusively established by the testimony, and that it was actively put on 
the market is likevi^ise clear. We believe that the burden which the 
défendant carries of proving that this was something more than an ex- 
periment, thereafter abandoned by the Goodrich Company, has been 
amply sustained by the publication in the August, 1903, number of the 
Rulaber World, by the f acts that the Goodrich people sent out numerous 
samples, and solicited and received orders for a large number, and 
that they had had prepared 6,000 cartons for the product and circu- 
lât advertising matter therefor. Thèse activities were sufficient to car- 
ry the enterprise beyond the stage of experiment into the realm of 
business, and, if the Goodrich Company had continued thereafter to 
manufacture sponges by this process, it seems indisputable that com- 
plainant would hâve no case. 

Why did the Goodrich Company discontinue the manufacture ? Two 
explanations are ofïered : One was to the great variety of their prod- 
ucts it was a matter of little conséquence to add another, which it 
seems to us is rather insufficient; the other explanation is that given 
by the président of the company, and is one which gives rise to a curi- 
ons and rather disturbing conjecture. It is that the waste resulting 
from the manufacture was so great as to render the work unprofitable. 
But why the waste? It seems a fair inference that, while they made a 
practical, marketable sponge, they had not gone far enough in experi- 



FEATHEREDGE KUBBEB CO. V. MILLER RUBBER CO. 257 

menting upon the compound to eliminate excessive waste ; the évidence 
leaving us with no other sufficient answer to the question. But they 
took a compound vi^hich answers precisely to the description of the pat- 
ent spécification under considération. They were extensive users of 
"raw rubber compound as commonly sold on the market." They 
made sponge rubber in large quantities for their own use and for other 
people. In other vifords, the évidence shows us very clearly that the 
Goodrich Company, skilled in the art of handhng' rubber compounded 
with blowing ingrédients and making a rubber product with a cellular 
structure, followed, step by step, so far as the patent under considéra- 
tion enhghtens one skilled in the art at ail as to the essential steps f rom 
the first, the process upon which Félix and Willis obtained the patent 
before us on an application filed four years later. FoUowing by antici- 
pation the disclosure of the Willis and Félix patent, the Goodrich 
Company failed to make a sponge that was commercially successful, 
because of excessive waste in manufacture, and this failure of the 
Goodrich people to make sponges to that degree of commercial success 
which seemed to them sufficient to justify continuing a product which 
gave so much promise as to cause them to actually place it upon the 
market is an answer to the query whether the patent contains a suffi- 
cient disclosure of the process. 

Why is not the court entirely warranted to assume from the évidence 
that, equivalently, the Goodrich operatives took "a raw rubber com- 
pound as commonly sold on the market," and "first thoroughly worked 
or niixed" it "in a manner well known," having theretofore "thorough- 
ly impregnated" it "with any of the well-known materials which are 
adapted to become gaseous upon the application of beat which is com- 
monly applied in curing rubber," and then, after "subjecting the com- 
pound to the direct action of steam under pressure, and after permit- 
ting the cooling and contraction of the resulting substance," broke 
"down the walls of the cells formed during the opération of curing, 
by subjecting it to the crushing action of closely confined roUs"? Who 
can say that skilled workmen of this great concern, acting in 1903 un- 
der the inspiration of the désire of Mr. Work to produce a product 
that would compete with the Russian sponge, and anxious to add an im- 
portant product to the manufactures of the company, could hâve more 
intelligently followed the process as disclosed by the Willis and Félix 
patent, had they had the patent before them, than they actually did 
proceed upon and follow the disclosure of that patent by anticipation? 

[2] This view of the transactions in Akron gives a great deal of 
point to the défense made secondly, that the spécifications of the patent 
are insufficient, in that there is no full disclosure of a workable com- 
pound or stock, or of a gas-f orming médium, which would produce the 
results claimed. And the feeling, which a considération of the expéri- 
ences in the Goodrich plant occasions, that there is something in this 
second défense, is emphasized by the trials which' witness Cutler, for 
the plaintifï, made upon compounds commonly sold in the market, and 
which resulted in many instances in the production of sponges which 
cannot be said to be merchantable. We are driven, theref ore, in con- 
templation of the activities at Akron and the expériences of Cutler, to 
2f)0 F.— 17 



258 250 FEDERAL REPOBTEK 

the conclusion that an essential élément of the process of making a tnar- 
ketable sponge economically, and consequently with commercial suc- 
cess, is a definite compound, at least definite as to the blowing and mod- 
erating materials which add the qualities to the rubber necessary to 
produce the peculiar required results, and that that élément is certainly 
not disclosed in this patent. Neither Mr. Palmer nor Mr. Cutler could 
be said to be anything less than a man more than ordinarily skilled in 
the art. The évidence shows that each of them was compelled to ad- 
mit in words, or by the logic of experiment, that the character of the 
compound is decidedly important ; that, in the language of Palmer, "it 
was necessary to possess more of the characteristics of the successful 
compound than of the unsuccessful." If there is a successful com- 
pound, important to be had, as Palmer seems to think, and as Cutler's 
expérience shows, then such is not disclosed in the patent before us, as 
it should hâve been. 

This does not mean that a compound should hâve been defîned so 
narrowly that équivalent chemicals and combinations might be used 
with impunity ; but it appears that success inheres, in some considéra- 
ble measure, in the use in the compound, besides blowing ingrédients, 
of an élément or éléments which work upon the consistency or native 
characteristics of the particular rubber stock employed and so modify 
the mass to be blown that the product desired may be reached. The 
spécifications could and should hâve been broadly amplified in this par- 
ticular; a generalization might hâve been employed. which would 
hâve broadly protected a step in the process which success demands 
should be taken, but of which the patent does not speak. 

We are forced, therefore, to conclude that the second défense is 
made, if, indeed, a défense of anticipation is not made, in the testimony 
relating to the work at Akron, and we are not prepared to say that 
that défense is insufficient. 

We do not deem it profitable to take time with the third défense. 
Clear proof, of course, would be necessary to establish it, and we can- 
not say that there is such proof hère. Besides, if there is, as we view 
it, a fatal omission in the disclosures, it would matter little what occa- 
sioned the lapse. It is likewise unnecessary to consider the fourth and 
fifth défenses, except we should say that the proof is not sufficiently 
conclusive to' make the défense of public use or abandonment by pat- 
entées, and that we are doubtful that an infringement is established in 
the testimony. 

There would be no doubt as to the question of infringement, were 
not the character of the compound used so important; for it appears 
that the important and controlling idea of the alleged invention by com- 
plainant's assignors, the idea which in practice brought success in the 
highest degree, is employed by the défendants, namely, the curing un- 
der steam pressure counteracting the pressure of the blowing ingrédi- 
ents. If, however, we may place dependence upon the expert testimo- 
ny of Dr. Harrison, and there is something persuasive in what he 
says, and find that there is an important new élément specially intro- 
duced into the compound used by défendants in the shape of water, 
whose office is to expand into steam at the proper point for a specially 



THE CITY OF ERIE 259 

successful resuit, and to counteract the steam pressure în the vulcan- 
izer, we are again involved with the important question wlaether it was 
not necessary that there should hâve been a more definite disclosure as 
to compound. It is certain that the défendants' process cornes within 
the broad Hnes of the typical claim. It is not so certain, however, that 
défendants infringe, if we read that claim in connection with the dis- 
closures, and find them insufficient for want of something definite as 
to the nature of "a successful compound." 
Decree may be entered for the défense. 



THE CITY or ERIE. 

THE BELGIUM. 

CLEVELAND & BUFFALO TRANSIT CO. v. GREAT LAKES S. S. CO. 

(District Court, N. D. Ohio, E. D. April 4, 1»18.) 

No. 2(381. 

1. Collision ®=3S6 — Négligence — Entry into Poet. 

A side-wheel steamer, wliich colllrted with a steam freisjliter Just in- 
side the main entrance of the Cleveland harbor, held eulpably négligent 
because of her rate of speed in entering the harbor, failure to govern her 
movements after giving two-blast whlstle signais In accordance with rule 
26 (Act Feb. 8, 1895, c. 64, § 1, 28 Stat. 649 [Comp. St. 1916, § 7936]), and 
failure to note and observe the movements and position of the freighter 
after giving tlie second two-blast signal. 

2. Collision <g=>76 — Disregard or Signals — Duty. 

If a steamer be approaching another vessel, wliich bas disregarded her 
signals or whose position or movements are imcertain, she is bound to 
stop until her course be ascertained with certainty. 

3. Collision «3=576 — Collision in Harbor — Liaiîility. 

A steamer, which failed to answer a second signal of an Incoming ves- 
sel and was maneuvered across the harbor entrance into the path of the 
incoming vessel, so that the two collided, held eulpably négligent; but 
tugs which towed the steamer from a river Into the harbor vvere not 
liable, the to-wllnes having parted before the maneuvers were begun, and 
before the second signal was given. 

4. Collision <@=j69 — Collision in Harbor — Vessel at Rest. 

ïhough a steamer dropped her anchor and went fuU speed ahead, in 
the course of her maneuvers to secure a position in a harbor where she 
could be coaled, such steamer, as to incoming sMpping, is not a vessel at 
anchor or at rest. 

5. Collision <S=144 — Damages — I^iability. 

Where tvi'o steamers collided, and both were at fault, the fault of each 
directly and proximately contributing to the collision, the damages 
should be divided. 

In Admiralty. Libel by the Cleveland & Buffalo Transit Compa- 
ny, a corporation, against the steamship Belgium, owned by the Great 
Lakes Steamship Company, and the steam tugs Dunkirk and Gillmore, 
owned by the Great Lakes Towing Company, a corporation, with a 
cross-libel by the Great L,akes Steamship Company against the City 
of Erie, owned by libelant. The City of Erie and the Belgium con- 

<g=3For other cases see same topic & KEY-NUMBBR in ail Key-Numbered Digests & Indexes 



260 250 FEDERAL EEPOETEE 

demned, and the damages divided, and the tugs Dunkirk and Gillmore 
exonerated. 

Goulder, White & Garry, of Cleveland, Ohio, for libelant. 

Hoyt, 'Dustin, Kelley, McKeehan & Andrews, of Cleveland, Ohio, 
for respondent Great Lakes S. S. Co. 

Holding, Masten, Duncan & Leckie, of Cleveland, Ohio, for re- 
spondent Great Lakes Towing Co. 

WESTËNHAVER, District Judge. The City of Eric, owned by 
the libelant, the Cleveland & Buffalo Transit Company, was in collision 
September 7, 1916, at about 8:20 p. m., Eastern standard time, with 
the steamship Belgium, owned by the respondent, the Great Lakes 
Steamship Company, both vessels sustaining damage, the liability for 
which is the subject-matter of this controversy. The steam tugs Dun- 
kirk and Gillmore, owned by the Great Lakes Towing Company, are 
joined with the Belgium in this libel, they having had the Belgium in 
tow just prior to the collision, and are charged by the libelant with 
joint liability for the collision. 

The City of Erie is a side-wheel combination passenger and package 
freight steamer. Her length over ail is 524 feet, her extrême breadth 
at the paddle wheel is about 76 feet, her molded breadth is 44 feet, 
and her molded depth, 18 feet. She was at this time plying between 
Put-in-Bay and Cleveland, making daily round trips. The Belgium is 
a steam freighter, plying between Eake Erie and upper lake ports. 
Her length over ail is approximately 400 feet, her molded breadth 48 
feet, and her molded depth 28 feet. The Dunkirk and Gillmore are 
steam harbor towing tugs, with lengths between perpendiculars of 
approximately 68 and 71 feet, respectively. 

This collision occurred just inside the main harbor entrance at 
Cleveland. The exact place of collision is in dispute, but it was near 
the harbor entrance, a short distance east of the west end of the east 
arm of the breakwater, and net less than 250, nor more than 700, feet 
southward inside the breakwater wall. The width of the harbor en- 
trance between the east and west arms of the breakwall is 700 feet. 
Two arms or jetties, Connecting a short distance from the ends of the 
breakwalls, project outwardly into Eake Erie at an acute angle, the out- 
er ends of which are 1,000 feet distant from and in direct line with 
the ends of the two arms of the breakwall. Thèse outer ends are also 
700 feet in width, and constitute the outer entrance to the Cleveland 
harbor. Upon each end of the east and west arm of the breakwall, 
and upon each end of the projecting jetties, are pier lights. It was 
through thèse outer and inner harbor entrances that the City of Erie 
was coming on the occasion when the collision took place. Her cus- 
tomary inward course was to port after rounding the west end of the 
east arm of the breakwater, thence on a northeasterly course to her 
pier or slip at East Ninth street, about seven-eighths of a mile from the 
inner harbor entrance. 

The Belgium entered this harbor from the south, coming down the 
Cuyahoga river. She had been taken in tow by the tu2s Dunkirk and 
Gillmore at the Central Furnace, and towed out of the river, stern 



THE CITr OF ERIB 261 

first ; the Dunkirk being in the lead and the Gillmore f oUowing. This 
river entrance to the Cleveland harbor is through a channel 350 feet 
in width, with piers on each side thereof. On the north end of each 
pier is a pier light; the one on the west river pier being in line with 
the pier light on the east end of the west arm of the breakwater wall, 
and the one on the east pier being in direct line with the center of the 
channel of the main harbor entrance from Lake Erie. The north ends 
of thèse two piers are distant 1,350 feet from the breakwater wall. 

[1] On the occasion in question the Belgium, as she emerged from 
the river entrance, was winded around by the tugs, stern eastward, 
into a position parallel to the breakwater wall, at a distance from 
the north end of the river piers somewhat in dispute, and, when in 
this position, owing to the action of a considérable sea running in 
through the harbor entrance, both towlines were snapped. The sub- 
séquent movements of the Belgium are clearly established. She backed 
eastward far enough to clear the incoming sea, tlien went full speed 
ahead, fetching up on her anchor, the order to drop which was given 
immediately following the order "Full speed ahead." She was in this 
position, with a 20-fathom anchor chain leading astern, when the col- 
lision occurred. The exact position reached by her in the harbor while 
executing thèse movements is a question much in dispute. The Bel- 
gium contends that her bow was then approximately on a line drawn 
from the east river pier light to the pier light on the west end of the 
east arm of the breakwater, and approximately 700, certainly not less 
than 600, feet distant from the breakwater; whereas the Erie con- 
tends that the Belgium was farther to the east, and 250, certainly not 
more than 350, feet, distant from the breakwater. Counsel seem to 
regard the solution of this disputed question as controlling. 

On September 7, 1916, the City of Erie shortly before, or at the 
time she started to turn southwardly into the outer harbor entrance, 
perceived the Belgium coming eut of the Cuyahoga river. At first only 
her range light was seen, but shortly thereafter the sailing lights of the 
lead tug were discovered by the pilot and lookout of the Erie. They 
testify that they were uncertain whether the Belgium was actually 
coming out into the harbor, or was tying up at the Pittsburgh dock, just 
inside the river entrance, but shortly thereafter the situation cleared, 
80 that they perceived she was actually coming out. 

At this time, or shortly thereafter, the Erie gave a two-blast whistle 
signal, indicating that she was directing her course to port. Apparent- 
ly this signal was given about the time the tugs began to wind the Bel- 
gium around. The question is raised as to whether this two-blast 
signal was in fact given, it being contended on behalf of respondents 
that only one two-blast signal was given, and that one at a later time. 
The first two-blast signal seems not to hâve been heard by the crew of 
either tug, or by Captain Savage of the fuel lighter Pittsburgh, which 
was following the Belgium for the purpose of supplying her with fuel. 
It was, however, heard by Captain Geel and First Mate Little of the 
Belgium. The testimony of Geel is explicit that this signal was given 
when the Erie was some distance outside the outer harbor entrance, 
and at the time the tugs first began to wind the Belgium around. AU 



262 250 FEDERAL REPORTEE 

the navigating officers of the Erie, a passenger named Smith, and a life 
guard, named Crapo, heard the signal, and testify as does Captain Geel. 
I find as a fact that this signal was given at the time and place stated 
by the navigating officers of the Erie. The exact location of the Erie at 
this time is also somewhat in dispute, but the weight of the testimony 
convinces me that she was then some distance beyond the outer harbor 
entrance, probably not less than a quarter of a mile therefrom. 

Receiving no answer, the Erie nevertheless continued on her course 
at fuU speed, without checking until abreast the outer harbor entrance, 
at which time her engine was checked to what is called "half speed" ; 
that is, from 26 révolutions to 9. This checking, the engineer and cap- 
tain say, should bring her down to half speed in three boat lengths, or 
approximately a distance of 1,000 feet. This checking, it will be noted, 
was not farther than 1,250 feet from the point where the Erie contends 
the collision occurred. 

Shortly after checking the Erie again blew a two-blast whistle signal, 
to which she received no response. She nevertheless continued on her 
course without stopping or reversing her engine. She had veered 
somewhat to the west of the center line of the harbor entrance in or- 
der to swing more easily around the west end of the east arm of the 
breakwall, and her wheel was at some point in the entrance put hard 
astarboard for this purpose. This maneuver was begun either sooner 
than was necessary, or the response of the Erie to her wheel was quick- 
er than had been anticipated. As a resuit, her navigating officers per- 
ceived when the Erie was within 50 feet of the breakwall that she 
might not clear the breakwall, whereupon her wheel was eased oiï to 
check lier swing to port, and later âgain put hard astarboard. 

Her navigating officers testify that her pilot house was abreast of 
the pier light when the second maneuver was started, and that the Erie 
swung around the west end of the east arm of the breakwall very close 
thereto, some saying as close as 20 feet. Immediately thereafter, and 
while this swinging was in progress, the Erie's captain, pilot, and look- 
out became aware that a colHsion with the Belgium was imminent, and 
immediately gave an order to stop and reverse, which order was 
promptly executed. It was then, however, too late to avoid a collision. 
The Erie collided at about 10 feet from her bow with the starboard 
quarter of the Belgium. The stanchions and upper superstructure of 
the Erie were swept away back almost to the paddle wheel, and the 
guard of the paddle wheel was raked by the Belgium before the Erie 
came to a stop. She paused for a few moments only, and then con- 
tinued to her pier at East Ninth street. 

The culpable fault of the Erie is predicated on the rate of speed 
maintained and the misjudgment and miscalculation of her navigating 
officers of the effect of her turning movements, and their failure to 
note and observe the position and movements of the Belgium after 
giving the two signais. It is urged that the speed maintained, coming 
into a restricted and crowded harbor, was highly négligent, if not reck- 
Iêss ; that the Erie not receiving any response to her two signais, should 
hâve stopped, and, if need be, reversed, until the situation cleared up; 
that her navigating officers failed to observe the movements and posi- 



THE OITY OF EBIE 263 

tion of the Belgium, but negligently assumed from their observations 
that the Erie had ample room to swing to port and continue on her 
customary course between the Belgium and the east breakwater wall 
without exercising ordinary care to make sure that thèse movements 
could be saf ely executed. 

The Erie's rate of speed is disputed. The witnesses called for the 
Belgium and tugs place her speed at the time of the collision as high 
as 12 to 15 miles an hour. The witness Crapo, not attached to either 
vessel, but a Hfe guard officer, occupying a lookout post on the north 
end of the west river pier, 350 feet south therefrom, and in a good 
position to observe the movements of both vessels, testifies that her 
speed was 12 miles an hour. The Erie officers admit that her full speed 
was 17 to 18 miles an hour, and that this speed was maintained until 
she was checked down abreast the outer harbor entrance, as already 
stated. The effect of this checking should hâve reduced her speed to 
8 or 9 miles an hour at the time of the collision, and such is their testi- 
mony. In exténuation of the alleged fault in maintaining this rate of 
speed, and also in not slowing down and stopping or reversing, when 
no answer was received to her two-blast signais, they urge that weather 
and other conditions required the maintenance of this rate for safety. 

I find from the évidence that the Erie's rate of speed was higher than 
is contended on her behalf, certainly not less than 10, probably as high 
as 12, miles an hour, at the time she reversed. Her log for this trip, 
shows an average rate of speed from Cedar Point to the place of col- 
lision of approximately 20 miles. This speed was not checked until 
some 1,200 to 1,500 feet distant from the point of collision, and on the 
admission of the Erie's navigating officers, it would require three boat 
lengths, or approximately 1,000 feet, to reduce her speed one-half. 
Furthermore, on this trip from Cedar Point to Cleveland a severe 
northwest storm had been raging. The wind, shortly prior to the time 
in question, had shifted from the northwest to the southwest, but the 
storm had developed a considérable sea, which continued to roll in 
from the northwest directly through the harbor entrance. The tenden- 
cy of this sea would be against a rapid checking of speed. The finding, 
therefore, of not less than 10 to 12 miles an hour is in accord with the 
great weight of the évidence. 

I also find that the Erie's contention that it was necessary, in view of 
weather conditions, to maintain this speed through the harbor entrance 
for purposes of steerage and safety, is not sustained by the évidence. 
In my opinion, no sufficient reason exists why the Erie should not hâve 
checked her speed to 4 miles an hour, upon receiving no answer to her 
signais, or, in the middle of the outer harbor, could not hâve stopped 
and reversed. She could, by checking to 4 miles an hour and holding 
her head slightly up to the wind, hâve corne in at 4 miles an hour under 
entire control and with perfect safety. The évidence of Captain Mur- 
ray, an experienced seaman, to this effect, is convincing, and the more 
or less guarded and qualified opinions to the contrary, expressed by 
the Erie's captain and by Captain McAlpin, do not, in my opinion, call 
for a différent conclusion. 

The Erie was behind her usual schedule. Ordinarily she arrived 
at 8 to 8 :10 p. m. She was carrying passengers and f reight to be trans- 



264 250 FEDERAL REPOETER 

ferred at the East Ninth street pier to the Buffalo boat, which was due 
to sail at 9 p. m. Her practice had been to swing to port without 
checking to a low rate of speed, as she did that evening, and direct her 
course diagonally in a northeastward direction to the Ninth street pier. 
Her navigating officers followed their usual custom. She was not en- 
deavoring to direct her course parallel to the east breakwater, as is 
contended, but in the usual course to her pier. This is further shown 
by the angle of colHsion, which ail agrée was approximately one of 45 
degrees. 

Apparently the navigating officers of the Erie paid little or no atten- 
tion to the movements or position of the Belgium after giving the sec- 
ond two-blast signal. At this time they say they were steering on the 
Belgium amidship, and that their course lay directly amidships the 
Belgium until shortly before the collision, at which time, as they tes- 
tify, the Belgium seemed to be moving astern, and her stern seemed to 
be moving northward towards the breakwater and closing the gap. 
Their testimony is significantly silent respecting any observations of 
the Belgium's movements after giving the two-blast signal until the 
movement eastward and northward of the stern of the Belgium be- 
came évident shortly before the moment of collision. 

It seems to me that, after giving the second two-blast signal, they 
decided the situation was safe, and that the Erie might proceed on her 
usual course at her high rate of speed directly to the Ninth street pier. 
Their miscalculation was due, in my opinion, to the starboarding of 
the wheel too early in the first instance, thus getting so close to the 
end of the breakwall that she was obliged to ease the wheel and con- 
tinue farther into the harbor before completing the swing than was 
customary, and the high rate of speed, at ail times maintained, carried 
her on this course farther from the breakwall than otherwise would 
liave been donc. For the conséquences of this miscalculation the Erie 
is responsible. 

[2] Upon thèse facts my conclusion is that the Erie was guilty of 
culpable négligence, directly contributing to the collision — first, in the 
rate of speed maintained ; second, in failing to govern her movements 
after giving her two-blast signais in accordance with rule No. 26 ; and, 
third, in failing properly to note and observe the movements and posi- 
tion of the Belgium after the second two-blast signal. Thèse conclu- 
sions are amply supported by the f ollowing authorities : The Corsica, 
9 Wall. 630, 19 L. Ed. 804; The City of Paris, 9 Wall. 634, 19 L. Ed. 
751 : The Syracuse, 9 Wall. 672, 19 L. Ed. 783; The Nevada, 106 U. 
S. 154, 1 Sup. Ct. 234, 27 L. Ed. 149; The New York, 175 U. S. 187. 
20 Sup. Ct. 67, 44 E. Ed. 126 ; Hawgood Transit Co. v. Mesaba Steam- 
ship Co., 166 Fed. 697, 92 C. C. A. 369. In The New York, supra, it is 
said: 

"Nothing is better settled than thiit, if a steamer be approaching anotlier 
vessel which bas dîsregarded her sif;iials, or whose iKJsitioii or movements are 
uncertain, she Is bound to stop until her course be ascertalned with certalnty." 

And further: 

"The lesson that steam vessels must stop their englnes In the présence of 
danger, or even of anticipated danger, is a liard one to learu ; but the fail- 



THE CITY OP ERIE 265 

lire to do so bas been the cause of the condemnation of so many vessels thr.t 
it vvouUl seem that thèse repeated admonitions must ultimately hâve some 
efCect. We cannot Inapress upon tlie masters of steam vessels too insistently 
tlie necessity of caution in passing or crossing the course o£ other vessels iu 
coustricted channels." 

[3-5] The conduct of the Belgium and the two tugs remains to be 
considered. On behalf of the Belgium it is urged that she was a ves- 
sel at anchor or at rest, and net under way, at the time the second two- 
blast signal was given, and was charged with no duty of answering, 
and, further, that her movements and final position left so much clear 
space for the Erie to pass on either side of her that her failure to an- 
swer or to maintain a lookout did not contribute directly to the colli- 
sion. On behalf of the tugs it is urged that when the towlines part- 
ed their liability for the Belgium's subséquent movements ended, that 
the duty of answering the second two-blast signal and maintaining 
thereafter a lookout and keeping away from the Erie was exclusively 
tipon the Belgium, and that the latter's subséquent maneuvers were 
entirely responsible for her part in causing the collision. 

The exact position of the Belgium when the towlines parted, with 
respect both to the breakwall and to the Erie's position when the sec- 
ond two-blast signal was given, becomes, therefore, vitally important. 
The Belgium, it clearly appears, passed out between the river piers at 
a speed of l^y-o to 2 miles an hour. Some witnesses place it lower and 
some higher, but the greater weight of the testimony requires this 
finding. The Belgium was brought out approximately in the center of 
the river channel, and, as soon as feasible, approximately when her 
pilot house was abreast with the river pier light, the tug Dunkirk be- 
gan winding her around, by puUing to the eastward ofï her port quar- 
ter. The Gillmore assisted this movement by pushing northwesterly 
across the Belgium's bow. The efïect of this opération was to retard 
the drift astern of the Belgium. It is testified, and I believe correctly, 
that her speed was thus reduced to not more than one mile an hour by 
this process of winding. The first two-blast whistle signal was given 
by the Erie at about the time this winding process began. The great 
weight of the testimony seems to agrée in this respect; certainly Cap- 
tain Geel and First Mate Little of the Belgium so agrée. 

This signal, as already stated, was not heard by any member of the 
crew of the Dunkirk or of the Gillmore, nor by Captain Savage of the 
fuel lighter Pittsburgh, which was following close behind the Belgium. 
The Erie was then well out beyond the outer entrance, and the wind was 
from the southwest, blowing 25 to 30 miles an hour. This distance, ve- 
locity, and direction of wind, the situation of the tug crews close to the 
water's surface, their préoccupation in the performance of immédiate 
duties, and the noise of the tugs' engines and machinery adequately 
and sufficiently explain their failure to hear the signal. It was, how- 
ever, heard by both the captain and first mate of the Belgium, and 
they also noted the failure of either tug to make a reply. The subsé- 
quent movements of the Belgium must be considered in the light of 
their knowledge. 

The exact position of the Belgium when the winding process was 
completed cannot be definitely fixed. Her length being 400 feet, she 



266 250 FEDERAL EEPORTEB 

must have been brought ont a sufficient distance to permit her to be 
winded around; but, on the other hand, this winding process began 
while a substantial part oi her was still in the river channel. The 
opération of the stern tug might naturally bring her stern closer to 
shore; but, again, the lighter Pittsburgh, a twin screw vessel, 165 feet 
in length, following her, passed through the open space to the west, 
and was, as her captain says, about 300 feet north and 100 feet west 
of the pier when the collision happened. The Belgium was probably 
not less than 400, nor more than 600 feet from the river piers when 
the towlines parted, and probably not less than 700 to 900 feet distant 
frdm the breakwàll. Her pilot house, at this time, was approximately 
on a line due north of the East River pier light, and her bow on a line 
with the center line of the river channel. That such was her position 
is also made évident by the fact of the parting of the towHne. The 
towline of the stern tug parted first, and that of the bow tug imme- 
diately thereafter. It is agreed that this was due to the rolling of the 
Belgium in the heavy sea after she had been brought parallel to the 
ends of the river piers and while the tugs were changing position to 
stop her further swing. She was therefore yet lying broadside to the 
sea rolling in through the outer entrance, and receiving its full force. 

The purpose of the Belgium at this time and prior thereto was to take 
on fuel from the lighter Pittsburgh under one or the other breakwalls. 
The duty of the tugs, aside from this matter of fueling, would have 
been fully performed after winding the Belgium around and throwing 
her head up to the wind a little farther than when the towlines parted. 
Neither the tugs nor the Belgium had any understanding respecting 
the place where fuel was to be taken on, except that ail knew it would 
be done in the harbor, and that it necessarily must be done under either 
the east or the west breakwàll. Evidently it was the intention of the 
tugs to take her under the east breakwàll, although this purpose had 
not been definitely declared when the towlines parted. Thereafter 
the Belgium was on her own resources. The towlines were her own, 
and it is not suggested that their breaking was due in any wise to any 
fault of the tugs. Captain Geel, it is true, testifies that the master of 
the Gillmore, when the towlines broke, called to him to back his en- 
gine ; but he admits that this was what he intended to do, and would 
have done, even without such a suggestion, and that this suggestion, 
if made, was not responsible for the subséquent navigation and move- 
ments of his vessel. 

I am of opinion that no such suggestion was made, and that ail move- 
ments of the tugs subséquent thereto were undertaken only for the 
purpose of returning the towlines to the Belgium. The responsibility 
for ail subséquent movements, including failure to answer the second 
two-blast signal, and to note and observe the movements of the Erie, 
and to navigate the Belgium in conformity therewith, is wholly upon 
the navigating officers of the Belgium. As already stated, the testi- 
mony is in accord that the second two-blast signal was given after the 
towlines broke, yet it seems not to have been heard by Captain Geel. 

Thereafter the Belgium proceeded to exécute this purpose, namely, 
to move astern far enough to get clear of the incoming sea and to get 



THE CITT or ERIE 267 

into a good position under the east breakwall to take on fuel, and then, 
with her head to the wind, be able to pass out the harbor entrance 
into the lake. In accomplishing this the Belgium first backed astern 
for a period of time and for a distance which cannot be definitely fixed. 
It is certain, however, that she went astern far enoiigh to clear the 
incoming sea, and beyond it such a distance that her subséquent move- 
ment, full speed ahead until she fetched up on her anchor, did not put 
her head into the sea. She remained at anchor in this position after 
the collision until fuel was put aboard. In executing this movement 
astern, her bow dropped away to port. This was due, according to her 
oiScers, to the fact that the wind was against her starboard bow. It 
was also probably due in a greater degree to the effect of the sea com- 
ing in through the harbor entrance against her starboard bow, after 
her stern had passed out of the sea into calm water. It is undoubtedly 
true that her stern also, during this backing movement, went farther 
north and substantially doser to the east breakwall. Captain Geel, 
observing that this resuit was following, gave an order for full speed 
ahead, which order was promptly executed. At the same time he gave 
an order to drop anchor, which was expeditiously executed, but, ob- 
viously from the movements necessary to accomplish it, requii'ed a 
longer time than to exécute the order for full speed ahead. Twenty 
fathoms or 120 feet of anchor line were dropped, and the vessel had 
moved ahead and fetched up on that anchor line when the collision 
took place. The lake depth at low water in the harbor is only 21 
feet. She went ahead also on a port wheel, which would hâve a tend- 
ency of carrying her bow closer to the breakwall. It is probable that 
the net resuit of thèse movements would place her some distance closer 
to the breakwall than she was when the towlines parted. At the time 
of the collision her engines were working full speed ahead, and she 
was still carrying sailing lights, and not displaying anchor lights. The 
contention that she was a vessel at anchor, or at rest, and not under 
way, is contrary to the actual fact. 

Upon thèse facts my conclusion is that the tugs were not guilty of 
any culpable négligence directly contributing to the collision. Their 
fault, if any, is too remote. I am, however, of opinion that the Belgium 
was guilty of culpable négligence contributing directly to the collision. 
She paid no attention to the two-blast signais ; indeed, paid so little at- 
tention that she did not hear the last. She kept no lookout elther astern 
or forward during thèse maneuvers. She knew the Erie, or some 
steamer, was comi»g in, but took no précaution to observe how or 
where it was to pass her. Her navigating officers were in as good po- 
sition to observe what the Erie was doing, and were chargçd with as 
high a degree of care so to observe and to guard against possible dan- 
ger from her, as the Erie was to observe and guard against danger 
from the Belgium. Her navigating officers maneuvered her around" 
in thèse constricted waters, across the harbor entrance, into the path of 
an incoming steamer, apparently either oblivious or careless of ail pos- 
sible conséquences. It is no sufficient excuse to urge that the Erie was 
free to pass the Belgium's bow, for such was not the Belgium's posi- 
tion when her officers heard the first and should hâve heard the second 



268 250 FEDERAL REPORTEE 

signal. It îs no sufficient excuse that more careful navigation of the 
Eric might hâve avoided an accident, notwithstanding the Belgium's 
négligence, by slipping through the clear space between the Belgium 
and the breakwall. Her officers cannot in this way be excused of the 
fault of crowding across the channel and course of an incoming steam- 
er, and crowding the navigable space of a steamer which had signaled 
her intention to take that course. 

It is not necessary to find that the Belgium was as close as 250 or 
350 feet from the breakwall at the time of the collision, nor that she 
was then moving eastward and her stem northward, closing in the 
gap. This movement had undoubtedly been suspended before the col- 
lision, probably before the Erie's officers became aware that a colli- 
sion was imminent. The Belgium could not, in my opinion, be exoner- 
ated, even if she were as far distant from the breakwall as 60O or 700 
feet, and, in my opinion, she was as close thereto as the lesser figure. 
The doctrine that, where one vessel's fault is clear, a mère suspicion 
that another is not free from fault is not sufficient to condemn the 
latter, has no application in this situation. The fault of both vessels is 
of the same kind and degree, and the fault of both contributed directly 
and proximately to the conséquences. Thèse conclusions are support- 
ed by the following authorities : Hawgood Transit Co. v. Mesaba 
Steamship Co., 166 Fed. 697, 92 C. C. A. 369; Pittsburg Steamship 
Co. v. Dtiluth Steamship Co., 222 Fed. 834, 138 C. C. A. 260; The 
Britannia, 153 U. S. 130, 143, 14 Sup. Ct. 795, 38 L. Ed. 660. 

My judgment is that both the Erie and the Belgium should be con- 
demned, and the damages divided, and that the tugs, the Dunkirk and 
the Gillmore, should be exonerated. 



ta re DANA BROS. 
(District CouU, S. D. Florida. Aprll 6, 191S.) 

1. Bankruptcy <®=5l40(i^) — Trustées — Rigiits of. 

Where a bankrupt, who had purchased flxtures under a retalned tltle 
contract, Joined to them other flxtures, tltle to which was in him, the 
trustée, the act of the banlcrupt, having been unauthorized, cannot sever the 
flxtures without paylng the seller such sum as would actually restore his 
flxtures to their original condition, and the amount to be paid cannot be 
computed by deducting from the secondhand value of the flxtures, if re- 
stored, their original value, less the expense of restoration, for that would 
work an injustice to the seller. 

2. Accession <@=3l — Title. 

In such case the seller did not acqulre title by accession to the flxtures 
jolned to those to which It had title. 

In Bankruptcy. In the matter of the bankruptcy of Dana Bros. On 
pétition to review an order of the référée. Pétition granted, and order 
amended. 

Whitaker, Himes & Whitaker, of Tampa, Fia., for petitioner. 
McMullen & Petteway, of Tampa, Fia., for trustée. 

<@:s>For other cases see same toplc & KEY-NUMBBR In ail Key-Numbered Digests & Indexes 



IN EE DANA BROS. 269 

CALL, District Judge. This cause cornes before me upon a pétition 
to review the order of the référée entered March 13, 1918. Sufficienf 
of the facts necessary to a décision of the questions at issue may be 
briefly stated as follows : 

On September 9, 1916, a set of store fixtures valued at $800 was 
purchased by the bankrupt on a retained title contract from H. M. 
Wade Manufacturing Company. Thèse fixtures were placed in a cer- 
tain store known as the Oriental Store. Thèse fixtures are referred to 
as fixtures No. 1. On April 1, 1917, certain other fixtures were pur- 
chased from the same party, of the value of $3,000, on a retained title 
contract, for a différent store building. Thèse are called the second 
fixtures. The testimony indicates that thèse respective fixtures were 
manufactured to fit a certain store space, and on receipt of them by 
the purchaser were installed in the store for which each set was intend- 
ed. Later the bankrupt had the fixtures from the Oriental Store re- 
moved to the store where the second fixtures had been installed, and 
connected with thèse second fixtures, so that the two sets constituted in 
reality but one set. To do this it was necessary to remove panels, 
molding, mirrors, etc., from the second set of fixtures, change posi- 
lions of parts, and substitute parts of the first set, and in some in- 
stances add new material. At or about the time of thèse changes and 
incorporation the bankrupt made the final payments on the first set of 
fixtures. 

Subséquent to this change the bankrupt went into bankruptcy, a trus- 
tée was duly appointed, and such trustée petitioned the référée for au- 
thority to take out the first set of fixtures and sell the same, relinquish- 
ing ail claim to the second set. The Wade Manufacturing Company 
contested the right of the trustée to do this, claiming that the bank- 
rupt, by bis unauthorized joining of the two sets of fixtures, and 
changes, etc., had made it impossible to separate the two sets without 
great damage to the second set, and by such joining had made of 
the two sets one set of fixtures, and, the title to the second set being ad- 
mittedly in it, the title to the first set had by the law of accession vested 
in it. The Wade Manufacturing Company prayed for alternative re- 
lief in the event the claim above noted was not sustained. A hearing 
was had by the référée on the pétition of the trustée, the answer to 
same of the Manufacturing Company, and évidence taken thereon, and 
on March 12, 1918, the référée made certain findings of fact from 
the évidence, and ordered the taking of further testimony to ascertain 
accurately the amount necessary to practically restore fixtures No. 2 
to the same state they were prior to the changes in the same made by 
the bankrupt, and that, upon the ascertaining of this amount, the péti- 
tion of the trustée be granted, upon his paying this amount to the 
Manufacturing Company. Thereupon additional testimony as to the 
damage donc to the fixtures No. 2, and the cost of materials, labor, 
etc., necessary to put said fixtures in their original condition, was tak- 
en, and on March 18, 1917, the référée made his findings and order 
granting the pétition of the trustée, upon his payment to the Manu- 
facturing Company of the sum of $262. On March 21, 1918, the Man- 



270 250 Ï^EDERAL EEPORTEK 

ufacturing Company filed its pétition to review this last-mentioned 
order. 

[1] The testimony on the last hearing before the référée showed, 
and the référée so found, that it would require $714 to put fixtures No. 
2 back in the original condition as sold to the bankrupt, and in addi- 
tion to this the testimony showed there would be the cost of labor and 
freight on the material. The method of arriving at the amount of 
damage seems to hâve been about as foUows : The original value of 
the fixtures was $3,000; $714 necessary to place them in the original 
condition ; therefore the présent value of the fixtures is the difiference 
between the first value of the fixtures and cost of placing them back in 
original condition, to wit, $2,286; that the damage, therefore, is the 
différence between $2,286, their présent value, and the value of such 
fixtures when repaired, found by the référée at $2,548, as secondhand 
fixtures. The difficulty with this line of reasoning is that the évidence 
does not fix the value of the fixtures in a completed condition as sec- 
ondhand. And again hère was the property of the Manufacturing 
Company, damaged by the unauthorized act of the bankrupt, parts 
of it destroyed, and to be damaged by the removal of the added parts 
to such an extent that it would require $714 worth of material, not 
considering the cost of labor and freight, to put it back in its original 
condition. The trustée is to be allowed to make this séparation, and 
leave the property of the Manufacturing Company in t,his damaged 
condition, on the payment of $262. The trustée stands in the shoes of 
the bankrupt for ail purposes, except as provided in the amendment 
of the bankruptcy act. Certainly it would be inéquitable to permit this 
to be done by the bankrupt, and equally so by the trustée. 

[2] The Manufacturing Company contends that it bas acquired title 
to fixtures No. 1 by accession. I hâve investigated this contention. 
Upon the facts of this case, as disclosed in the testimony, I do not 
think the law applicable. The trustée should bave been required to pay 
the Manufacturing Company the amount shown by the testimony nec- 
essary to repair the damage done by the bankrupt in changing and at- 
taching fixtures No. 1, and by the trustée in detaching same. The tes- 
timony shO'Ws the amounts necessary to do this are $714 for material, 
$100 for labor, and about $50 freight. 

The pétition to review will be granted, and the order so amended 
that it will require the payment by the trustée to the Manufacturing 
Company of thèse amounts before detaching fixtures No. 1 from fix- 
tures No. 2, and that three days be allowed the trustée within which ta 
make his élection to do this, or deliver said fixtures as they now exist 
to the Manufacturing Company. 



THE EDGAR F. CONEY 271 

THE EDGAR F. CONE Y. 
(District Court, S. D. Florlda. April 15, 1918.) 

1. TOWAGE ©=>15(2) — LlABILITY OF TUG EVIDENCE. 

Where a lieavily loaded ligliter in tow capsized, évidence held insufH- 
cient to sliow tliat tlie fowboat was in fault. 

2. TowAGE <©=>11(,1) — Si'EEi) — Négligence. 

Wliere a ligliter in tow capsized, the rate of speed, whicli could not 
hâve exceeded three miles per liour, cauuot be deemed excessive, or in- 
dicating négligence on tlie part of tlie towboat. 

3. TowAOE <©=3l5(2) — Capsizing of Vessei. in Tow — Res Ipsa Loquitur. 

Wliere heavily loaded lighter in tow of a tug capsized at a time wlien 
the vessel was ijroceediug at a rate not in exeess of three miles an liour, 
and there was nothing to show négligence on the part of the tug, the 
doctrine of res ipsa loquitur does not apply, and will not support a re- 
eovery against the tug. 

In Admiralty. Libel by the Edwards Construction Company against 
the steam tug Edgar F. Coney; Philip Shore, claimant. Libel dis- 
missed. 

McKay, Withers & Phipps, of Tampa, Fia., for libelant. 
Whitaker, Himes & Whitaker, of Tampa, Fia., for claimant. 

CALL, District Judge. The libelant in this case hired the tug to tow 
a loaded lighter from a dock in Tampa to Point Pinellas. About 12 
o'clock on the night of January 9, 1914, the tug made fast to the light- 
er, which had been loaded with iron rods, iron pipe, certain goods, a 
hoisting engine, and an upright boiler by the libelants, and started on 
her voyage. In about three hours she had reached a point ofï Gadsden 
Point, some 12 or 14 miles from the point of departure, when the light- 
er turned over and the cargo went overboard. Some of it was lost en- 
tirely, and a portion salvaged. For the damage caused the libelant by 
the loss of goods and expenses of salvage of the lighter and the prop- 
erty saved, they seek by thèse proceedings to recover, on the ground 
that the lighter was overturned by the négligent manner in which it was 
towed. 

This négligence is denied in the answer, and it is further contended 
that the overturning of the lighter was due to the manner in which it 
was loaded, and due to the leakage into the lighter while being towed. 
After reviewing the testimony taken by the parties to maintain their 
différent contentions, I find that the facts material to a décision of the 
case may be concisely stated as f ollows : 

[1-3] The libelant, during the day of January 9th, chartered the 
Coney to tow the lighter from Tampa to Point Pinellas on Tampa Bay. 
That the libelant loaded the lighter with property, and in the night of 
January 9th, a little after 12 o'clock, the tug made fast to this lighter 
with a 300 foot tow line by a bridle, and commenced her voyage. The 
night was calm and starHt. Behind this lighter was another and 
smaller lighter, made fast at the rear corners by short lines about 4 
feet long, and behind this last lighter a motor towboat and several 

^s^For otlier cases see saroe toplc & KBY-NUMBER in ail Key-Numbered Dlgests & Indexes 



272 250 FEDERAL KEPOKTEB 

small boats were being towed. That everything went well until about 
3 o'clock in the morning of January lOth, when the lighter was dis- 
covered over to the starboard of the wake of the tug, and immediate- 
ly overturned. The captain of the tug, who was sitting aft of the pilot 
house watching the tow, saw the Hght hanging on the upright boiler 
turn over to starboard. This boiler and engine was loaded near the 
starboard corner of the h'ghter as she was being towed. The proof 
further shows that the lighter was net making water while at the dock 
being loaded, but according to the testimony of witnesses the strain 
of towing and piling up of water on the front of the lighter while be- 
ing towed will cause leakage in lighters otherwise tight when lying at 
a dock. The testimony also shows that this was a deck lighter, carry- 
ing ail cargo on the deck, and that it was heavily loaded, drawing some 
3% feet of water, with 12 to 18 inches freeboard. No one from the 
tug could see the lighter, but only the light on the upright boiler was 
visible. 

The cause of the overturning of the lighter is the main question to be 
deterrained. No one saw just how it occurred. The libelant contends 
that it was due to a sudden change of course of the tug. The only tes- 
timony upon which this claim could be based was that of a fireman, 
who had come up from the fire room of the tug a few moments before 
and was sitting on the rail, where he could watch his gauges, and the 
fact that the lighter was to the starboard of the tug's wake. The testi- 
mony of the fireman impresses me with little force, because at night 
it would be impossible for one sitting on the rail of the tug to tell 
whether the change of direction was due to the change of the course 
of the tug or the sheer of the tow, and in addition to this there is the 
positive testimony of the wheelman, an experienced man, to the con- 
trary ; nor would the position of the lighter, when seen by the witnesses, 
support this contention against the testimony of the wheelman, as it 
is abundantly shown by the testimony that lighters do take sheers for 
which no satisfying reason can be given. But, when water has accu- 
mulated in lighters, they are more liable to sheer than when free of 
water. 

I am unable from this testimony to find that the overturning of the 
lighter was due to the action of the wheelman. Nor do I think the 
évidence shows it was due to excessive speed at which the lighter was 
being towed. Taking the distance from Tampa when the overturning 
occurred, the time consumed in making that distance, and the force of 
the ebb current favoring the boat, the rate of travel through the water 
could not hâve exceeded 3 miles per hour, a speed not excessive, or in- 
dicating négligence on the part of the towboat. Nor do I think the tes- 
timony shows a case falling under the doctrine of res ipsa loqusur. 
If the proof does not establish négligence on the part of the towboat, 
the lîbelant cannot recover. In this case I do not find that the tug or 
tow was negligently managed, and therefore the libelant cannot re- 
cover in this proceeding. 

A decree will be entered, dismissing the libel, at the cost of the libel- 
ant. 



PARTOLA MFG. CO. V. NORFOLK & W. RY. CO. 273 

PARTOLA MFG. CO. v. NORFOLK & W. RY. CO. 
(District Court, S. D. New York. July 2, 191S.) 

1. REifovAL OF Causes ©=112 — Kri'ECT— Objectio^^s to JtinisnicTiON'. 

AU jurisdlctional objections inuy lie inade utter reiuoval to tlie fédéral 
court of a cause begun in the state court. 

2. cori'okations 1®=='642(1) — fokeign coupokatioxs — "doixg busixess" in 

State. 

A foreign corporation wiileli had formerly niaintained an office in New 
York wliere it solicited business caunot be deenied "doing business" In 
that State during tlie period when it was dismantling tlie office and pre- 
paring to abandon the same, pursuaut to order of tlie United States Dl- 
rector General of Railroads. 

[Ed. Nr)te. — For otlier définitions, see Words and Phrases, First and 
Second Séries, Doing Business.] 

3. Corporations <®='642(4'72) — Foreign Corporations — "Doing Business" in 

SïATE. 

VVhere a Virginia railroad company which maintained no Unes lu New 
Yorli soUclted passenger and frelght business lu New Yorls, It was not 
thereby "doing business," as the solicitors merely sought to obtain busi- 
ness, recelved no money for freight, and issued no tlcl^^^ets for transporta- 
tion of passengers ; hence service of process on one of the compauy's New 
York solicitors would not glve the New Yorlc court jurisdiction. 

At Law. Action by the Partola Manufacturing Company against 
the Norfolk & Western Railway Company, begun in state court and re- 
moved to the fédéral court. On motion to set aside service of sum- 
mons for want of jurisdiction. Motion granted. 

The action Is at law to recover $3,511.01 brought against défendant by the 
transférée of a biU of lading calling for dellvery at New York City of a ship- 
ment of caustic soda consigned from SaltvlUe, Va., and alleged never to bave 
been dellvered. 

The summons and complalnt were served Aprll 2.5, 1918, upon Samuel M. 
Stevenson, gênerai Eastern agent of défendant company at No. 299 Broadway, 
New York City. 

Défendant has no railroad In the state of New York and bas never made 
application for authority to do business as a foreign corporation in New York 
nor designated any person for service there, under section 18 of the General 
Corporation Law of New York. 

As the question hère presented may corne up from time to time, I shall, for 
the convenience of counsel, quote somewhat fully from Mr. Stevenson's affida- 
vit so as to save counsel, having sirailar cases, the trouble of examlning the 
original papers on file. 

Mr. Stevenson states as follows: 

"The plalntifE above named deUvered to me copies of the summons and 
comjilaint In this action on the 25th day of AjjrU, 1918. At that time I was 
employed as 'manager' of an association of railway and steamship companies 
known as the Virginia, Tennessee & (Jeorgia Air Line, aud also known as the 
'Fast Freight Llne.' The faets in regard to thls association are, briefly, as 
follows: 

"The members of the as.sociation are: Clyde Steamship Company, Baltimore 
Steam Packet Company, New York, Philadelphia & Norfolk Railway Company, 
Merchants' & Miners' Transportation Company, Ncjrfolk & Western Railway 
Company, and Old Dominion Steamship Company. The association formerly 
maintained an office at No. 290 Broadway, N(>w York City. This office consist- 
ed of six rooms. On the door of the office there appeared the foUowing: 'Nor- 
folk & Western Railway Lines, Virginia, Tennessee & Georgia Air Llne, Old 



<©=»For other cases see same topic & KEY-NUMBBR in ail Key-Numbered Digests & Indexes 
250 F.— 18 



274 250 FEDERAL REPORTER 

Dominion Steamshlp Company, Cumberland Gap Despatch, Norfolk & Western 
I)es])Ktcli.' The association had on Its pay roll In this New York City office 
iiincte'jD persons: Fourteen nien and flve women. The worlv of the office con- 
fcilsted entirely in soliciting orders for the can-iage of freight in Interstate 
commerce over two or more Connecting liues of the association and arranging 
for the shipment of the same. A transaction typical of the vvork carried on 
wonld be as fnllows: An order would be obtained for the carriage of freight 
from New York City to some point in Virginia ; the association would blll the 
goods for shipment frorn New Yoi'k on the Old Dominion Steamship Company 
Une to Roanolce, or some other Virginia port, there to be transferred to the 
Norfolk & Western Railway Company and sent over its Une to the point of 
destination. AU raoïieys for the carriage of freight were received by tlie 
carriers themselves and were the charges publlshed by the several car- 
riers as requlred by section 6 of tlie act of Congress known as the act ta 
regulate commerce. No funds coUected for the carriage of freight were 
handled by the association, and the only funds of tlie association carried in 
the New York office were mone.vs to be used in paying the salaries of the 
employés and the office charges. Thèse funds were kept in a bank account in 
the name of the Virginia, Tennessee & Georgia Air Line, and not in the 
name of any of the members of the association. My dutles as manager of the 
New York office of the association consisted in the gênerai supervision of the 
work of soliciting orders for the carriage of freight and arranging for the 
shipment of the same as outllned above. Practically my entire tlme was oc- 
cupled in Virginia, Tennessee & Georgia Air Line Association work. 

"On said 25th day of April, 1918, I was also employed independently by 
the Norfolk & Western Railway Company as gênerai Eastern agent. The Nor- 
folk & Western Railway Company Is a corporation organlzed and existing 
under and by virtue of the laws of the state of Virginia, and not elsewhere, 
and bas its principal office in the city of Roanoke in the county of Roanoke, 
in said state of Virginia. Its line of railroad extends through or into the 
States of Virginia, West Virginia, Maryland, North Carolina, Kentucky, and 
Ohio, and not elsewhere. No part of its said Une of railroad is now or ever 
lias been loeated within the state of New York, and it opérâtes no engines 
or cars within the said state. Freiqht movlng over its said Une of railroad 
to a destination within the state of New York enters said state on railroad 
Unes which are owned and operated by other railroad companies. While 
any car owned by said Norfolk & Western Railway Company is being used or 
operated by such other railroad Company within the state of New York, such 
other railroad company pays to said Norfolk & Western Railway Company 
a per diem charge or rental for the use of such car, and such car while within 
the state of New York is operated exclusively by the carrier upon whose line 
of railroad it is, and ail of the freight nioneys earned by said car in the 
said state are retainod by the carrier there operatlng such car and no part 
of such freight charges is paid to the Norfolk & Western Railway Company. 
The eastern terminus of the Norfolk & Western Railway Company's said 
Une of railroad is Norfolk, Va. Its western termlni are Cincinnati and Co- 
lumbus, Ohio. Its northern terminus is Hagerstown, Md. Its southwestem 
termlni are Bristol and Norton, Va., and its southern termlni are Winston- 
Salem and Durham, N. C. The business of said Norfolk & Western Railway 
Company is and always bas been merely the transportation of freight and 
passengers over its said Une of railroad which Is and always has been lo- 
eated entirely outside of the said state of New York. 

"The said company occupied desk space in the office of the Virginia, Ten- 
nessee & Georgia Air Line Association and hired for my assistance one man 
and a stenographer. My work consisted in supervising the solicitation of 
orders for the carriage of freight over this Une solely within the States of 
Virginia, West Virginia, Maryland, North Carolina, Kentucky, and Ohio. The 
freight traffic managers of the Norfolk & Western Railway Company and of 
other railroad companies which hâve no railroad within the state of New 
York, and the freight managers of other companies which connected with 
them and hâve and operate rallroads within the said state, together fixed or 
establlshed through rates for the carriage of freight from points without to 



PAKTOLA MFG. CO. V. NOEFOLK & W. KY. CO. 275 

points witliin the said state, and vice versa. The railroad vvhicli tirst recelved 
such freight by transportation was termed the 'initial road,' and It published 
such through rates, flled the same in accordance with the Interstate Com- 
merce Act, and distributed them among shippers. My duties and the duties 
of my assistant were to interview shippers of freight that nilght pass over 
said Norfolk & Western Railway Company's said Une of railroad and présent 
to them the advantages of shipping over that Une, at the same time quotiug 
them through rates on such freight. The shipper located within the state of 
New York would deliver the freight to the initial carrier in the said state 
and would receive from it a receipt for tlie goods to go to the desired destina- 
tion. Tlie Norfolk i& Western Railway Company had no facilities of any 
Ivind for receiving or storing freight lu said state and did not, in fact, re- 
ceive any freight in said state. Said Norfolk & Western Railway Company 
did not give the shipper any receipt for the freight which was to niove from 
within the said state and pass over its said Une of railroad, but the Nor- 
folk & Western Railway Company did give the shipper of freight originating 
on its said Une of railroad and to go to a destination within the said state 
of New York a tlirough bill of lading, and if the freight charge was prepaid 
said Norfolk & Western Railway Company recelved the full transportation 
charge and the same was later divided proportionately between the several 
carriers over whose Unes said freight passed to its said destination. The 
freight charge on freight moving from a point within to a point without the 
state of New York if prepaid was paid to the initial road or steamship Une 
or road or steamship Une which flrst recelved the freight for transportation. 
If the shipment of such freight was made 'coUect,' the freight charge was 
paid at the place of destination, and in eithcr case sucli total freight charge 
was later divided proportionately between the several carriers over whose 
Unes said freight passed to its said destination. Said Norfolk & Western 
Railway Company never coUected freight charges within the state of New 
York, and its said employés had no authority to and did not, in fact, make 
any contract for said Norfolk & Western Railway Company. Neither I nor my 
assistant as soliciting agents had anythiug whatever to do with transporta- 
tion over said Norfolk & Western Railway Company's Une of railroad and 
had no authority and did not, in fact, approve of the freight charges of said 
Company, nor did we corne in contact witli said freight. Bill s against said 
Norfolk & Western Railway Company were paid by said company's checks, 
coming direct from. its principal oflice in Roanoke, Va. The initial carrier or 
road which recelved the freight destined to go from a point within to a 
iwint without the state of New York and over said Norfolk & Western Rail- 
way Company's said Une of railroad did not allow or pay the said Com- 
pany any refund for freight so shipped and which had been obtained by the 
soliciting agents within the state of New York for said Norfollc & Western 
RaUway Company, and such initial carrier did not pay the Norfolk & Western 
Railway Company any portion of said soliciting agents' salaries, or of the 
rent of said Norfolk &. Western Railway Company's desk space in the office 
of the 'Fast Freight Line' Association, or other expense incident to the main- 
tenance of such soliciting agency. The only beneflt which was derived by 
said Norfolk & Western Railway Company from the services of its said 
agents was its charges for transporting freight or passengers over its said 
line of railroad. Orders for the shipment of freight only over the Norfolk 
& Western Railway Line were not nunierous. A negligible portion of my 
time was required in the supervision of the work. 

"The Norfolk & Western Railway Company also formerly maintained an 
ofilee at 1245 Broadway for the solicltation of passenger trattic over its line. 
On the door of this office, which consisted of one room, appeared the name 
'Norfolk & Western Railway Company.' A couple of desks and chairs made 
up the equipment of the 'ofHce.' The function of this passenger oflice was 
to furnish persons with information concerning rates and through sleeping 
car service and to solicit the carriage of passengers over the Norfolk & 
Western Lines. No tickets of any kind were sold by this ottice, except tickets 
for transportation on the Old Dominion Steamship Company's Lines, and, 
if an applicant wished a through rail ticket, the oflice bought the same from 



276 250 FEDERAL REPORTER 

the Pennsylvania or other Unes connected with the Norfolk & Western. One 
man and an assistant were ail that were needed to carry on the work of the 
office. 

"On said 25tli day of April, 1918, the Norfolk & Western Kailway Company 
was carrylng on no sollcitatlon of frelght orders within the city or state of 
New York. On or about the 15th day of December, 1917, in anticipation of 
the taking over of the rallroads by the United States govemment, we discon- 
tinued our freight actjvities within New York state, both the sollcitatlon for 
the Norfolk & Western Railway Company and for the Virginia, Tennessee & 
Georgla Air Line Association. The United States governnient took over the 
rallroads at noon December 28, 1917, pursuant to a proclamation of the Presi- 
d.ent, dated December 26, 1917. * * * At that time the work of windlng 
up the freight soliciting business of the New York office of the association and 
of the Norfolk & Western Road was in progress." 

In Mr. Stevenson's atlidavit it Is further stated that under date of March 
30, 1918, the United States Director General of Rallroads issued circular No. 
17, the effect of which was, among other tliings, to close offices maintained for 
the sollcitatlon of otf-line business. Défendant company on April 29, 1918, 
issued an order effective April 30, 1918, closing its off-line freight and passen- 
ger oflices in New York City and state. Mr. Stevenson further sets forth: 

"I myself, at the tlme the plaintiff above named delivered the said papers 
to me, was engaged on the 2r)th day of April, 1918, exclusively in the work 
incident to windlng up the affiairs of the said office of the association and of 
the Norfolk & Western Raihvay Company, and flve days thereafter both the 
freight and passenger offices of the Nortolk & AVestern Railway Company were 
physlcally closed, pursuant to the order above referred to. The passenger 
office contlnued opérations until said order became effective on April 30, 1918, 
but sollcitatlon had ceased and its activities consisted in furnishing the pub- 
lic, as was formerly done as part of the good wlU of soliciting, with Informa- 
tion concernlng rates and through service over the Norfolk & Western Line, 
and no sollcitatlon of passenger trafflc was being carrled on at the date the 
summons and complaint were left with me. The office equipment, furniture, 
etc., of the freight offices of the association and of the Norfolk & Western 
Railway Company hâve been sold and the offices hâve been closed slnce April 
30, 1918. Exceptlng as above stated, nothing was being done by the Norfolk 
& Western Railway Company in the state of New York on said 25th day of 
April, 1918, to the best of my knowledge, information, and belief." 

Other afiidavits are submitted substantlating Mr. Stevenson's affidavlt in 
respect of varions essential features. 

Arthur H. Masten, of New York City, Stanley M. Moffat, of Yon- 
kers, N. Y., and Théodore W. Reath, of Philadelphia, Pa. (E. Henry 
Lacombe, of New York City, of counsel), for the motion. 

Hovell, McChesney & Clarkson, of Brooklyn, N. Y. (Sidney A. 
Clarkson, of Brooklyn, N. Y., of counsel), opposed. 

MAYER, District Judge (after stating the facts as above). It is un- 
necessary to consider several points raised by both parties because the 
motion can be disposed of by determining whether or not défendant 
was, on April 25, 1918, doing business within the state of New York, 
in the sensé which would subject it tO' the jurisdiction of this court. 

[ 1 ] Although the cause was originally brought in the New York Su- 
prême Court and removed hère, it is now settled that ail jurisdictional 
objections may be made in this court after removal. Mechanical Ap- 
pliance Co. v. Castleman, 215 U. S. 437, 30 Sup. Ct. 125, 54 L. Ed. 
272; Toledo Railways, etc., Co. v. Hill, 244 U. S. 49, 37 Sup. Ct. 591, 
61 L. Ed. 982. 



PARTOLA MFG. CO. V. NORFOLK & W. KT. CD. 277 

[2, 3] From the affidavits présentée! it seems to me that whatever in 
the way of "doing business" had theretofore gone on had ceased on 
April 25, 1918, as the resuit of the taking over of the railroads by the 
government. It may be well, however, to consider, in addition, wheth- 
er the acts of défendant constituted the much mooted "doing business." 
The solution of this question dépends practically upon the considéra- 
tion of the meaning and effect of a limited number of leading cases. 
The facts in this case seem to comc within the doctrine of Green v. Chi- 
cago, Burlington & Quincy Ry. Co., 205 U. S. 530, 27 Sup. Ct. 595, 
51 L. Ed. 916, which décision seems recently to hâve been reaffirmed 
in principle in Enterprise, etc., Railway Equipment Co. v. Norfolk & 

Western Ry. Co., 245 U. S. 631, 38 Sup. Ct. 64, 62 L. Ed. . In 

St. Louis Southwestern Ry. Co. v. Alexander, 227 U. S. 218, 33 Sup. 
Ct, 245, 57 L. Ed. 486, Ann. Cas. 191 5B, 77, the railway company did 
certain additional things, such as attending to claims presented for set- 
tlement and negotiating in respect thereof , and in such case the court 
held that the company was doing business, stating : 

"Hère, then, was an autliorized agent attending to this and presnmably 
other matters of a l^indred cliaracter, undertaliing to act for and represont the 
«ompany, negotiating for it and in its lichalf deelining to ad.iust tlie daim 
made against it. In this sitnation we think this was the transaction of hnsi- 
ness in ijelialf of tlie company by its authorized agent in sueli manner as to 
bring it within the district of New York, in which it was sued, and to niake 
It suhject to the service of process there." 

No such situation is hère presented, and, as pointed out in St. Louis 
Southwestern Ry. Co. v. Alexander, supra, it is the duty of the court 
to décide each case upon its own facts. 

In International Harvester Co. v. Kentucky, 234 U. S. 579, 34 Sup. 
Ct. 944, 58 L. Ed. 1479, the International Harvester Co. so handled its 
business that there was a continuous course of shipment of the har- 
vester company's machines into Kentucky. In other words, as the re- 
suit of solicitation of business and method of business, the court was 
satisfied that the présence of the corporation within Kentucky neces- 
sary to the service of process was shown, "when it appears that the 
corporation is there carrying on business in such sensé as to manifest 
its présence within the state, although the business transacted may be 
entirely interstate in its character." 

The court nevertheless regarded the question involved as a close one. 
It distinguished the International Harvester Co. Case from the Green 
Case, supra, reiterating, "we hâve no désire to départ from that déci- 
sion which," the court added, "was an extrême case." The court also 
said, "In the case now under considération, there was something more 
than mère solicitation." 

In Tauza v. Susquehanna Coal Co., 220 N. Y. 259, 115 N. E. 915, 
the facts were in substance the same as in the International Harvester 
Co. Case, and, after a careful and learned review, the court held that 
service upon the défendant foreign corporation was good. 

In the case at bar, however, there are no such facts as were present- 
ed in the International Harvester Co. and Tauza Cases, and the facts 
seem to be well within the principle of the Green Case. While, per- 
haps, the question is close, I conclude that this court is without juris- 
diction, and therefore that the motion should be granted. 



278 250 FEDERAL REPORTEB 



MOORE & TIERNEY, Inc., v. ROXFORD KNITTING CO. 
(District Court, N. D. N. Y. July 1, 1918.) 

1. War <&=4 — Precaftionaby Acts — Contracts — Bbeach — Défenses. 

Under National Défense Aet, § 120 (Comp. St. 191G, §§ 3115f-311ûh), and 
Navy Appropriation Act March 4, 1917, c. 180, it Is tlie duty of a manu- 
facturer, where the United States orders war supplies, to comply with tlie 
order, though that prevents him fronn carrying out eariier contracts 
with private persons; but wUere a manufacturer voluntarily enters into 
contracts with the United States, which prevent him from carrying out 
earller contracts, he is not relleved from an action of damages for 
breach. 

2. War <g=54 — Precautionary Acts — ^Eftîict on Contracts — Breach. 

Where a manufacturer, after communication with a member of the 
Advisory Board of National Défense, and being infornied that the orders 
were obligatory, contractée! to supply underwear for tlie navy, held, that 
the order must be deemed to hâve been placed in accordanee with 
National Défense Act, § 120 (Comp. St. 1916, §§i BllSf-SllSh), and Navy 
Appropriation Act March 4, 1917, c. 180, making compliance obligatory ; 
so the manufacturer was not liable for breach of contracts with private 
persons, which he was unable to carry out because of the navy contract. 

3. War <®=34— Pbecatjtionaby Acts — Effect on Contract Rights. 

As great publicity was given to National Défense Act, § 120 (Comp. 
St. 1916, §§ 3115f-3115h), and Navy Appropriation Act March 4, 1917, c. 
180, which authorizes the government in tlme of war to place compulsory 
orders with manufacturers and for supplies, manufacturers and private 
persons with whom they contract must be presumed to bave contracted 
with référence to such laws. 

4. War <g=>4 — Wah-Makinq Power — Authority of Congbess. 

In view of the paraniount war-making power of Oongress, National Dé- 
fense Act, § 120 (Comp. St. 1916, §§ 311.ôf-3115h), and Navy Appropria- 
tion Act March 4, 1917, c. 180, authorizing the government to place com- 
pulsory orders with manufacturers for needed supplies, are valid. 

5. War ®=34 — "War Matekial" — "Stores and Supplies." 

Within Navy Appropriation Act March 4, 1917, c. 180, allowing the 
government in time of war to place compulsory orders with manufacturers 
for war material, and definlng "war material" as including arms, ammu- 
nitlon, armanent, stores, supplies, and equipment for ships, underwear 
for the crews of war vessels is part of the "stores and supplies." 

At Law. Action by Moore & Tierney, Incorporated, against the 
Roxford Knitting Company, which counterclaimed. Judgraent for 
plaintiiï. 

Action to recover $14,090.08, purchase price of knit goods sold and 
delivered. Défendant countercîaims for alleged damages for non- 
performance of balance of contract. Plaintifï answers to the counter- 
claim that orders of the United States government, which it was re- 
quired to fil! under the acts of Congress (National Défense Act June 

3, 1916, c. 134, 39 Stat. 166, and Naval Appropriation Act March 

4, 1917, c. 180, 39 Stat. 1168), made compliance with its contract on 
time impossible, and that the law gave precedence to such government 
orders, and postponed compliance under the contract with défendant, 
and that, défendant having declared the contract ended, it can recover 
for goods not paid for actually delivered, and is not liable for dam- 
ages. 

(g=5For other cases see same toplc & KEY-N0MBER in ail Key-Numbered Digesta & Indexes. 



MOORE & TIERNEY V. ROXFOED KNITTING CO. 279 

Thos. O'Connor, of Waterford, N. Y., and John T. Norton, of Troy, 
N. Y., for plaintiff. 

Gallert & Heilborn, of New York City, and D. F. Costello, of Syra- 
cuse, N. Y., for défendant. 

RAY, District Judge. At the time war was declared between the 
United States of America and the Impérial Government of Germany 
the plaintiff, engaged in manufacturing knit underwear, had a valid 
contract or contracts with the défendant, by the terms of which it 
was obhgated to make and deliver to défendant certain quantifies of 
woolen knit undershirts and drawers at agreed priées and at or within 
specified times. Thèse contracts came into existence by way of ac- 
cepted orders, which were subject to delays or nondelivery by strikes, 
accidents, or for any reason beyond the control of plaintiff. It was 
then engaged in the performance of such contracts, and intended in 
good faith to perform, but was prevented by the performance of cer- 
tain government orders. The plaintiff is one of several manufactur- 
ers of such goods located at Cohoes, N. Y. Deliveries aggregating 
$14,090.08 were made and not paid for, and considérable quantifies 
were not delivered. Défendant allèges $20,000 damages for nonper- 
formance or alleged breach of contract. 

May 22, 1917, one A. Frey, who was a member of a committee of 
the Advisory Board of National Défense, wrote each of thèse manu- 
facturers at Cohoes, N. Y., including the plaintiff, inf orming them that 
the United States government was in need of and désirons of obtain- 
ing knit undershirts and drawers, inquiring as to the capacity of the 
mills of the manufacturers and the quantifies they could furnish, at 
what priées, and also saying: 

"I would requost you not to write me that you are sold up and cannot 
furnish any of thèse soods. I am aware that this condition prevails with 
every one. * * * It is not the comniittee's intention to place the whole 
burden on any one inill, but to divide It according to production, and I 
would therefore request you to give this your prompt attention and advlse 
me promptly how much of this it will be your pleasure to take, and at what 
priées." 

On receiving thèse communications, thèse manufacturers called a 
meeting at Cohoes, where the communications of Mr. Frey were con- 
sidered and their nature discussed, and ail agreed it was a require- 
ment of the government of the United States, constituting an order, 
to which it was their duty under the acts of Congress hereafter men- 
tioned to respond. Each manufacturer was left to figure out what 
amount it could furnish, and a committee was appointed to see and 
confer with Mr. Cromwell, chairman, etc., of the Advisory Board of 
National Défense, but who in fact was also acting for Mr. Hancock, 
Paymaster of the Navy, in charge of the purchase department, in ob- 
taining and submitting information and making recommendations for 
navy supplies, etc. This committee did see him regarding the matter, 
and was advised by him that the requirement was obligatory. 

The productive capacity of thèse mills was given, and later the 
committee recommended to the War Department the making of an 



280 250 FEDERAL REPORTER 

agreement or contract with the plaintiff for certain knit shirts and 
drawers of the kind and quality desired by it, and which plaintiff's 
mill could make. This order or contract of June 6, 1917, did not de- 
mand the full capacity of the plaintiff's mill, and if there had been no 
further orders from or contracts with the govemment the plaintiff 
could hâve and would hâve filled this government order or contract, 
and also its contract with the défendant. Preceding this June 6th 
order Mr. Cromwell, on letter heading reading as foUows : "Knit 
Goods Committee of the Council of National Défense, 357 Fourth 
Ave., New York" — wrote as f ollows : 

"New York, June 1, 1917. 
"Messrs. Moore & Tierney, Colioes, N. Y. — Gentlemen; — We are In recelpt of 
your letter in relation to government underwear. A recommeudation is goiiig 
by this same mail to the Quartermaster's Department, at Philadelpliia, that a 
contract sliould be issued to you for .3fi,000 shirts and 36,000 drawers, at $1.2,'') 
each, for delivery, freight and cartage paid to the New York deimt, the goods 
to be made aecording to the spécifications known as 'Alternate B,' on which 
your priée was based, The committee is required to secure a very large quan- 
tity of this underwear. It is our wish to disturb the regular business of each 
manufacturer as little as possible, and therefore we will do our very best to 
secure the full amount of underwear needed witliout coming back to you for 
additional doliveries. Sliould the government retiulrements increase, we shall 
hâve to ask you for a larger part of jour i>roduct between now and the 
end of the year, 

"Yours truly, Lincoln Cromwell, Chalrman." 

July 2, 1917, Mr. Cromwell, signing as chairman, etc., wrote the 
plaintiff and the other manufacturers of knit goods mentioned as to 
the urgent wants and needs of the United States Navy Department for 
knit undershirts and drawers, and amongst other things wrote : 

"The Knit Goods Committee lias received an emergency call for the Navy 
Department," etc. ; and also, "It is absolutely necessary that this underwear 
should lie obtained ;" and al.so, "This underwear can be made by only a 
limited nuniber of mllls In the country. We hâve carefully apportloned it 
among the différent mills, and know that we cannot secure tlie quaiitity needed 
nnless we can reeeive from you 25,000 shirts and 25,000 drawers by October 
Ist and the same quantity additional by December Ist." 

Mr. Cromwell was still acting for the Paymaster of the Navy, as 
stated. On the receipt of thèse letters another meeting of the manu- 
facturers was held, and such letters were considered and construed 
as an order, within the meaning and intent of the acts of Congress 
referred to, and priées and quantities and deliveries were later agreed 
upon with the government agencies and formai written agreements 
were made. This order was for more than plaintiff could produce, 
and Cromwell was so notified, and July 20th Mr. Cromwell wrote they 
had telegraphed the Navy Department, suggesting that a certain quan- 
tity "shall be canceled from your order," and this was donc. Nothing 
was said in the contracts or agreements or orders that thèse were 
orders placed under the acts of Congress, but it is established that the 
plaintiff so understood them and acted accordingly. The évidence of 
Paymaster Hancock plainly indicates that the Navy Department so 
understood them, and that the department placed orders in several 
ways, both before and after their adoption of a formai commandeer- 
ing form of order the latter part of July, 1917. 



MOOEE & TIERNEY V. EOXFOED KNITTING CO. 281 

[1] To fill this order or contract with the Navy Department, and 
also the orders or contracts with the War Department, demanded and 
required the total capacity and output of the plaintiff's mill wViile fiU- 
ing same, and plaintifï was unable, if it fiUed the government orders 
or contracts, to make further deliveries to défendant under its contract 
with it at the times agreed, and défendant was so advised, whereupon 
it in substance and efïect canceled the contract, refused to pay for the 
goods delivered, and claimed and claims damages for nonperform- 
ance. Two other contracts or orders were placed with the plaintiff 
by the government, one November 16, and one December 12, 1917, 
and from the acts of the parties and the correspondence it cannot be 
doubted that it was understood the plaintifï in accepting the work, 
was acting under the orders and demands of the government. The 
plaintifï does not contend that thèse government requirements released 
it from the contract with défendant and obligation to perform it, ex- 
cept in so far as it postponed performance on its part and gave préf- 
érence to this government work. The défendant claims thèse were 
not orders under or within the meaning of the acts of Congress re- 
ferred to, and that it was justified in acting as it did, and may coun- 
terclaim its damages. 

If before or after war was declared a party. A., entered into a con- 
tract with another party, B., to make and deliver to him goods, wares, 
and merchandise, stores and supplies, such as the government requires 
for army or navy use, or both, and after the passage of the acts of 
Congress — Public No. 85, 64th Congress, approved June 3, 1916, "An 
act for making further and more effectuai provision for the national 
défense, and for other purposes," and Public No. 391, 64th Congress, 
approved March 4, 1917, "An act making appropriation for the naval 
service for the fiscal year ending June 30th, 1918, and other purposes" 
— the United States government, being at war, came in and ordered 
or directed such party. A., to make goods, wares, and merchandise 
of the nature and kind referred to for it, and compliance with such or- 
der and requirement of the government demanded or required the en- 
tire output of the factory of such party thereafter, ail it could rea- 
sonably produce, it was the duty of such party to comply with such 
government order or requirement, and if compliance therewith made it 
impossible for such party to fill or comply with or perform its contract 
with such other party, B., according to its terms and within the time 
specified, and such other party, on being notified of the inability to 
so perform, declared the contract ended, he cannot recover damages 
for nonperformance by A. The same rule applies in case of a con- 
tract made after the enactment of such statutes; a state of war ex- 
isting. 

In such case or cases it is clear that, under the provision of the acts 
of Congress referred to, performance by A. within the time required 
by the contract was made impossible by the act and requirements of 
the United States government. But if party A., thinking it more 
profitable or patriotic to work for the government than in the perform- 
ance of its existing contract with B., voluntarily sought a contract 
with the government and offered its services for compensation in the 



282 250 FEDERAL REPORTEE 

manufacture of such goods as the government required, and voluntari- 
ly entered into such a contract sought by it with the United States, the 
performance of which demanded and required its entire output, ail it 
reasonably could produce, and party A. thereupon voluntarily declined 
or refused to proceed further in the performance of his contract with 
party B., he is not excused, and party B. may recover or offset and 
counterclaim his damages, if any. In such case performance by A. is 
not prevented by act of God, or vis major. Nonperformance is the 
resuit of his voluntary act or acts, not that of the government, and he 
acts under no compulsion whatever. 

But section 120 of the National Défense Act, ref erred to, authorizes 
the Président, through the head of any department, in addition to the 
présent authorized methods of purchase or procurement, the methods 
before in use, to "place an order" with any individual, firm, associa- 
tion, Company, corporation, or organized manufacturing industry for 
such product or material as may be required, and which is of the na- 
ture or kind usually produced or capable of being produced by such 
individual, firm, or corporation, and then further provides that, when 
such an order is placed, "compliance with ail such orders for products 
or material shall be obligatory," and "shall take precedence over ail 
other orders and contracts theretofore placed with such individual, 
firm:, or corporation." Refusai to comply is made a crime, and severe 
punishments may be inflicted, etc. 

The compensation is to be fair and just, and it is assumed it may be 
agreed upon between the manufacturer and the United States in writ- 
ing and by way of a contract. The Navy Appropriation Act provides : 

"(b) That in time of vvar, or of national emergency arisliig prier to Marcli 
first, nineteen liundred and eigliteen, to be detennined by tlie Président 
by proclamation, tlie Président is hereby authorized and enipowered, in addi- 
tion to ail other existing provisions of law: 

"First. Within the liniits of the amounts appropriated therefor, to place an 
order witli any person for such ships or war material as the neces.sities of 
the Government, to be determined by the Président, may reyuire and which 
are of the nature, kind, and quantity usually produced or capable of being 
produced by such person. Compliance with ail such orders shall be obligatory 
on any person to whom such order is given, and such order shall take preced- 
ence over ail other orders and contracts theretofore placed with such person. 
If any person owning, leasing, or operating any factory equipped for the 
building or production of ships or war material for the navy shall refuse or 
fail to give to the United States such préférence in the exécution of such an 
order, or shall refuse to build, supply, furnish, or manufacture the kind, 
quantity, or quality of ships or vi'ar material so ordered at such reasonable 
price as shall be determined by the Président, the Président may take immé- 
diate possession of any factory of such person, or of any part thereof without 
taking possession of the entire factory, and may use the sanie at such times 
and in such manner as he may consider necessary or expédient." 

[2-4] In the instant case now before this court did the Président — 
that is, the government — through any of his or its agencies "place an 
order" with the plaintiff for thèse undershirts and drawers which was 
obligatory, under the acts of Congress referred to, upon the plaintiff, 
and which it was required to fill; or could the plaintiff, at any time 
after the agreements were entered into, hâve refused to perform with- 
out violating the acts of Congress, saying, as to each, it is only a mère 



MOOEE & TIEENEY V. EOXFOKD KNITTING CO. 283 

voluntary contract